Dockets: 2017-486(IT)G;  
017-605(IT)G;  
2
2
017-606(IT)G  
BETWEEN:  
MAGREN HOLDINGS LTD.,  
and  
Appellant,  
HER MAJESTY THE QUEEN,  
Respondent,  
AND BETWEEN:  
2
176 INVESTMENTS LTD. (as successor to Grencorp Management Inc.,  
successor to 994047 Alberta Ltd.),  
Appellant,  
and  
HER MAJESTY THE QUEEN,  
Respondent,  
AND BETWEEN:  
MAGREN HOLDINGS LTD.  
(Successor by amalgamation to 1052785 Alberta Ltd.),  
Appellant,  
and  
HER MAJESTY THE QUEEN,  
Respondent.  
Appeals heard on common evidence with the appeals of  
James T. Grenon v. Her Majesty the Queen – 2014-3401(IT)G and The  
RRSP Trust of James T. Grenon (552-53721) by its Trustee CIBC Trust  
Corporation v. Her Majesty the Queen – 2014-4440(IT)G  
Appeals heard on February 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 2019  
and September 9, 10, 11, 12, 13, 2019, at Winnipeg, Manitoba.  
Page: 2  
Before: The Honourable Justice Guy R. Smith  
Appearances:  
Counsel for the Appellants:  
Cy M. Fien  
Brandon Barnes Trickett  
Ari M. Hanson  
Aron W. Grusko  
Counsel for the Respondent:  
Ifeanyi Nwachukwu  
Tanis Halpape  
Christopher Kitchen  
Jeremy Tiger  
JUDGMENT  
In accordance with the attached Reasons for Judgment, the appeals from the  
Notices of Reassessment made by the Minister of National Revenue on November  
1
8, 2016 in respect of the 2006 taxation year, pursuant to subsection 184(2) of the  
Income Tax Act, are hereby dismissed with costs to the Respondent.  
The parties will have 60 days from the date of hereof to provide written  
submissions regarding costs. Such submissions shall not exceed 15 pages for each  
party but shall, on consent of the parties, incorporate submissions on costs in the  
appeals of James T. Grenon; 2014-3401(IT)G and The RRSP Trust of James T.  
Grenon by its Trustee CIBC Trust Corporation; 2014-4440(IT)G.  
Signed at Ottawa, Canada this 24th day of June 2021.  
“Guy R. Smith”  
Smith J.  
Citation: 2021 TCC 42  
Date: 24062021  
0
1042022  
Dockets: 2017-486(IT)G;  
017-605(IT)G;  
2
2
017-606(IT)G  
BETWEEN:  
MAGREN HOLDINGS LTD.,  
and  
Appellant,  
HER MAJESTY THE QUEEN,  
Respondent,  
AND BETWEEN:  
2
176 INVESTMENTS LTD. (as successor to Grencorp Management Inc.,  
successor to 994047 Alberta Ltd.),  
Appellant,  
and  
HER MAJESTY THE QUEEN,  
Respondent,  
AND BETWEEN:  
MAGREN HOLDINGS LTD.  
(Successor by amalgamation to 1052785 Alberta Ltd.),  
Appellant,  
and  
HER MAJESTY THE QUEEN,  
Respondent.  
AMENDED REASONS FOR JUDGMENT  
Smith J.  
Page: 2  
I. OVERVIEW  
[
1] The appellants herein (the “Appellants”) were Canadian-controlled  
private corporations directly or indirectly controlled by one James T. Grenon  
“Grenon”). As a result of a series of transactions that occurred on the same  
day, the Appellants reported capital gains of $226,258,087 and capital losses of  
224,762,077 under Part I of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.)  
the “ITA”). They then declared a series of dividends of $109,720,500 and  
(
$
(
elected pursuant to subsection 83(2) that they be deemed to be capital  
dividends payable from their respective capital dividend accounts. Capitals  
dividends in that amount were later paid out to Grenon personally.  
[2]  
The Minister of National Revenue (the “Minister”) reassessed the  
Appellants to reduce the capital gains and capital losses described above to nil  
and issued notices of assessment pursuant subsection 185(1) on the basis that  
the dividends were subject to Part III tax on excess dividends.  
[3]  
The Minister has taken the position that a series of transactions were  
undertaken in order to artificially manufacture the capital gains and offsetting  
capital losses leading to the alleged additions to the capital dividend accounts  
of the Appellants and the payment of non-taxable capital dividends to their  
respective shareholders and eventually to Grenon personally.  
[4]  
The Minister has argued that the steps undertaken to implement the  
series of transactions were legally ineffective or were a sham and a  
misrepresentation. In the alternative, the Respondent has relied on the general  
anti-avoidance rule (“GAAR”) as set out in section 245 of the ITA.  
[5]  
The appeals herein were heard on common evidence with the appeals  
of James T. Grenon v. The Queen, 2014-3401(IT)G (the “Grenon Appeal”) and  
The RRSP Trust of James T. Grenon (552-53721) by its Trustee CIBC Trust  
Corporation v. The Queen, 2014-4440(IT)G (the “RRSP Trust Appeal”).  
[6] Reasons for Judgment in those appeals were issued in 2021 TCC 30  
(the “TCC Decision”) with an indication that reasons for judgment in  
connection with the Appellants herein would be delivered separately.  
[7] In these Reasons for Judgment, the three corporate appellants will be  
referred to collectively as the “Appellants” or separately as Magren Holdings  
Ltd (“Magren”), 1052785 Alberta Ltd. (“105”) and 994047 Alberta ltd.  
Page: 3  
(
“994”), being the corporate names of the Appellants when the series of  
transactions occurred.  
[8] All legislative provisions refer to the ITA. Unless explicitly set out in  
these Reasons for Judgment, they are set out in the attached Annex A.  
II. THE ASSESSMENTS  
[9]  
On October 15, 2013, the Minister issued Notices of Reassessment  
pursuant to Part I of the ITA (the “Part I Reassessments”) denying the capital  
gains and capital losses and reducing them to nil. These assessments were  
notifications that no tax was payable. They have not been appealed and are not  
directly the subject matter of these appeals.  
[10]  
The Minister then issued Notices of Assessment on January 24, 2014  
and February 18, 2014 pursuant to subsection 185(1) of the ITA on the basis  
that the capital dividends declared by the Appellants were in fact excess  
dividends subject to Part III tax as described in subsection 184(2) . Notices of  
Reassessment were issued on November 18, 2016 (the “Part III  
Reassessments”) to reduce the tax rate resulting from a legislative change.1  
[
11]  
III. THE ISSUES  
12] The Court finds that the following issues need to be addressed:  
. Whether the Part III Reassessments are statute-barred and therefore invalid  
The Part III Reassessments are the subject matter of these appeals.  
[
1
and without legal force, as argued by the Appellants, on the basis that the  
Part I Reassessments were statute-barred;  
2
. Whether the Part III Reassessments are void ab initio, invalid and without  
legal force, as argued by the Appellants, on the basis that the Minister failed  
to issue only “one” assessment for each election filed and failed to proceed  
“with all due dispatch”, as required by subsection 185(1) of Part III;  
1
“As of July 2010, the rate of tax imposed by subsection 184(2) is also changed, as part of  
a series of amendments that reflect recent and planned reductions in tax rates. The rate is  
reduced from 75% of the excess capital gains dividend to 60% of the excess”: Amended  
by Technical Tax Amendments Act, 2012 S.C. 2013, c.34, s. 184(2).  
Page: 4  
3
4
. Whether the series of transactions that are alleged to have given rise to the  
subject capital gains and capital losses, were legally effective or were a sham  
and a misrepresentation;  
. Whether the series of transactions that are alleged to have given rise to the  
subject capital gains and capital losses resulted in additions to the  
Appellants’ respective capital dividend accounts or whether they were  
excess dividends subject to Part III tax pursuant to subsection 184(2);  
5
6
. If the Court concludes that the capital dividends were excess dividends  
pursuant to subsection 184(2), whether the Appellants are entitled to rely on  
the ‘protective’ elections filed pursuant to subsection 184(3) to have the  
excess dividends treated as ordinary taxable dividends;  
. Whether the series of transactions are subject to GAAR.  
IV. BACKGROUND FACTS  
[13] Certain background facts that are material to these appeals were  
considered in the TCC Decision, notably in paragraphs 10 to 99. What follows  
is a summary of the evidence and relevant conclusions reached by the Court.  
[14] Grenon had accumulated substantial assets in a self-directed RRSP  
(the “RRSP Trust”) and CIBC Trust Corporation acted as Trustee. The assets  
held in the RRSP Trust included units of Foremost Industries Income Fund  
“FMO”), a publicly traded mutual fund trust established in 2001 of which  
(
Grenon was a trustee. The RRSP Trust held 58% of the units and the remaining  
units were widely-held.  
[15] In 2003, Grenon undertook steps to establish several income funds  
(the “Income Funds”) relying on the exempt distribution rules of the provinces  
of Alberta and British Columbia (“BC”). As the promoter and initial trustee of  
these funds, he purported to issue units of each Income Fund to 171 investors,  
each of whom were required to acquire a minimum of 100 units at $7.50 per  
unit for total consideration of $750 per Income Fund. Grenon and legal entities  
owned or controlled by him also participated and acquired several blocks of  
units as part of the first distribution.  
[16]  
Following the closing of the exempt distributions and filing of the  
required reports with the Alberta and BC securities commissions, Grenon  
arranged for the RRSP Trust to subscribe for and acquire in excess of 99% of  
Page: 5  
the units of the Income Funds, thus establishing effective control positions, as  
further explained in the TCC Decision. He continued to act as trustee of the  
Income Funds or directed who would act in that capacity.  
[17]  
It is not disputed that Grenon intended from the beginning to structure  
the Income Funds as qualified investments for RRSP purposes. This was his  
stated objective and one of the key issues considered in the TCC Decision was  
whether they met the definition of a “mutual fund trust” as defined in the ITA  
and Regulations. Grenon and CIBC Trust took the position that the Income  
Funds were qualified investments for RRSP purposes. The Minister did not  
agree.  
[18]  
The Court concluded that the steps undertaken by Grenon to establish  
the Income Funds as a mutual fund trust were legally ineffective such that the  
RRSP Trust had in fact acquired units of non-qualified investments, as defined  
in the ITA.  
[19]  
Further and in the alternative, the Court concluded that Grenon’s  
attempt to establish the Income Funds as investments that were to be acquired  
by the RRSP Trust and then actively managed and controlled by him as the  
annuitant thereof was abusive and contrary to the GAAR in that it contravened  
the object, spirit and purpose of the RRSP regime and in particular subsection  
1
46(4) which seeks to prohibit an RRSP from carrying on “any business or  
businesses in the year” that are not at arm’s length from the annuitant. In  
particular, it provides that all income generated by such investments (including  
1
00% of capital gains) is taxable income that does not accrue in the RRSP on a  
tax-exempt basis.  
[
20] The particular Income Fund that is relevant to these appeals was  
known as the Tom 2003-4 Income Fund (“TOM”) established on March 14,  
003 by deed of trust pursuant to the laws of Alberta. As with all the other  
2
Income Funds, it purported to issue units to 171 investors thus raising capital of  
approximately $128,250.  
[21]  
On November 14, 2005, the RRSP Trust subscribed for 3,821,850  
units of TOM for total consideration of $152,874,000. In satisfaction thereof,  
TOM accepted a transfer-in-kind of the FMO units held by the RRSP Trust. As  
a result, the RRSP Trust owned approximately 99.5% of the units of TOM and  
the remaining 0.5% were held by the initial 171 investors, as noted above.  
Page: 6  
[22]  
Although the Appellants had initially described this transaction as a  
“sale” by “the Grenon RRSP (…) of its 11,077,827 units in FMO to [TOM] for  
$
152,874,000 (…)” paid “by the issuance of units in [TOM]”, I accept their  
closing submissions that this transaction is more accurately described as an  
exchange or transfer-in-kind that did not increase the value of the RRSP Trust.  
[23]  
I find that there was no evidence of an actual sale or similar  
transaction and as far as Grenon was concerned, the units of TOM (and indeed  
the units of all the other Income Funds in which the RRSP Trust had acquired  
units) were part of his RRSP Trust holdings. There was no suggestion that by  
acquiring units in TOM or by transferring the units of FMO, Grenon had  
effected a withdrawal from the RRSP Trust.  
[24]  
The Minister has acknowledged that the units of FMO, as a publicly  
traded mutual fund trust, were a qualified investment as defined in the ITA but  
has taken the position that the units of TOM issued to the RRSP Trust in  
exchange for the FMO units were not a qualified investment because they failed  
to meet the definition of a “mutual fund trust”. This is consistent with the  
conclusion reached in the TCC Decision that as a result of the exchange  
transaction described above, the RRSP Trust had in fact acquired a non-  
qualified investment having a fair market value of $152,874,000. However, as  
noted above, even as a non-qualified investment, the units of FMO transferred  
to TOM had not been withdrawn from the RRSP Trust. It was clear from  
Grenon’s testimony that he understood that a withdrawal from his RRSP would  
have been a taxable event.  
[
25]  
transaction, TOM held 11,077,827 units of FMO representing approximately a  
8% interest and the public unitholders continued to hold 7,838,612 units  
representing a 42% interest.  
In any event, it is not disputed that following the exchange  
5
[26]  
FMO did not carry on any business activities and the exchange  
transaction described above did not have the effect of modifying its structure or  
its underlying assets. It held the units of Foremost Ventures Trust (“FVT”).  
[
27]  
invested in partnerships from which it earned income” and these partnerships  
manufactured, sold and serviced heavy all-terrain vehicles, drilling equipment  
As described by the Appellants, FVT “directly or indirectly (…)  
“
and other products used in mineral exploration, water well drilling, industrial  
construction, transportation and the energy and environmental industries”. It is  
Page: 7  
not disputed that FVT was a unit trust within the meaning of subsection 108(2)  
of the ITA.  
[28]  
FVT owned 99.9% of the units in Foremost Universal Limited  
Partnership (“FULP”), a limited partnership under the laws of Alberta that was  
one of its operating partnerships. FVT and FMO also directly or indirectly  
owned another limited partnership known as Foremost Industries Limited  
Partnership (“FILP”).  
V. THE RELEVANT TRANSACTIONS  
[29]  
The Court did not have the benefit of an agreed statement of facts but  
considered the testimony of Grenon as well as the documentary evidence. Bruce  
MacLennan also testified but indicated that although he had participated in  
various capacities in the FMO reorganization, he had generally relied on  
Grenon. None of the other fact witnesses described in the TCC Decision were  
questioned on the FMO reorganization.  
[30]  
The Court also considered the expert evidence of Alan B.  
Martyszenko but for reasons set out in Annex B that are incorporated into these  
Reasons for Judgement, I find that his testimony and the Report should be  
rejected on the basis that it was neither relevant nor necessary. Alternatively, I  
find that it should be given little or no weight.  
[31]  
The description of the series of transaction described herein as the  
FMO reorganization is drawn primarily from the Appellant’s testimony and the  
description set out in the Notices of Appeal. The Respondent’s version and  
assumption of facts relied upon will be reviewed below.  
(1) FMO Reorganization According to the Appellants  
[32]  
Following the transfer of the FMO units from the RRSP Trust to  
TOM, Grenon undertook a series of transactions that would lead to the  
establishment of a new publicly traded mutual fund trust to be known as  
Foremost Industries Income Fund (“FIF”). It would acquire the assets and  
assume the liabilities of the underlying operating partnerships. FMO would then  
cease operations and be wound-up.  
[33]  
It was intended that the new structure would essentially replicate  
FMO and that all existing unitholders would simply exchange units on a one-  
Page: 8  
for-one basis. FVT would be replaced by a new venture trust to be known as  
Foremost Commercial Trust (“FCT”). The operating partnership known as  
FILP would be replaced by Foremost Industries LP (“New FILP”) and FULP  
would be replaced by Foremost Universal LP (“New FULP”). The following  
table describes the relevant entities:  
Existing entities (FMO)  
New Structure (FIF)  
FIF  
FMO  
FVT  
FCT  
FULP  
FILP  
New FULP  
New FILP  
[34]  
The steps required to implement the reorganization were set out in a  
Notice of Special Meeting to Unitholders (the “Special Meeting”) signed on  
November 29, 2005 by Grenon as trustee of FMO with a proposed meeting of  
December 28, 2005. It included an Information Circular and Proxy Statement  
(
“
the “Information Circular”) and Reorganization Agreement (the  
Reorganization Agreement”). A subsequent reorganization agreement was  
signed on December 28, 2005 (the “Reorganization Amendment Agreement”).  
[35]  
A summary of the proposed transactions explained that “[t]he  
purpose” was “to effect a reorganization and restructuring of the Fund in a  
manner that provides equitable treatment among the Unitholders and maintains  
the business and goodwill of the Fund”. The objectives were listed as being i)  
“to simplify, somewhat, the organizational and governance structure of the  
fund”; ii) to “increase the cost for tax purposes of business assets (…)”; and iii)  
to increase the trading liquidity of the new units “to attract a wider retail  
investor base beyond the current concentration in tax deferred plans” also  
described as “exempt plans”.  
[36] Unitholders were required to choose between either “Option 1” and  
“Option 2”. Option 1 was the default selection but it also applied automatically  
for all units held in exempt plans. It was described as the “First Stage  
Disposition” whereby units in FMO would be exchanged for units of the new  
fund on a “one-for-one basis”. Option 2 was described as “the Second Stage  
Disposition” whereby new units would be distributed “following a number of  
steps” again on a one-for-one basis.  
[37] Unitholders who selected Option 1 were advised that this could trigger  
tax consequences including a potential capital gain or capital loss based on the  
Page: 9  
difference between the adjusted cost base of their units in FMO and the fair  
market value of the new units of FIF issued in exchange on a one-for-one basis.  
[38]  
Unitholders who selected Option 2 were advised that they too would  
receive new units on a one-for-one basis “following the completion of a number  
of steps.” It was explained that they would “be distributed the assets of [FMO],  
consisting of all the issued and outstanding [FVT] units, on a pro rata basis”  
and as a result “will be allocated substantially all of the income of the Fund and  
all of the income of [FVT], and will be subject to taxation on such amounts”.  
[39]  
It was further explained that as a result of this, the unitholders who  
selected Option 2 would, “over the course of the Reorganization”, receive “all  
of the issued and outstanding trust units of” FVT and, consequently “would be  
allocated all of the income from FVT, which income [would] be paid in the  
form of New Units” and that they would be subject to additional taxable income  
“as compared to Unitholders who have elected to participate in the  
Reorganization through Option 1”. This recital concluded with an explanation  
that “it is expected that Unitholders will only elect Option 2 if they have very  
unusual tax circumstances” and that “due in part to the additional tax liability”  
those “who elect not to participate in Option 1 above (…) were urged to seek  
independent tax advice.”  
[40]  
With the exception of the units held by TOM, all public unitholders of  
FMO either selected Option 1 or were deemed to have done so as explained  
above.  
[41]  
Grenon admitted in cross-examination that at least one unitholder had  
chosen Option 2 but that he had contacted that individual to explain that this  
was likely not a good financial decision since he would have to report  
additional income. The unitholder in question eventually agreed to select  
Option 1.  
[42]  
I note at this point that Grenon’s testimony on this issue was not  
entirely convincing. Despite his repeated assertions that all unitholders were at  
liberty to choose Option 2, the Court finds that he actually wanted them to  
choose Option 1. I also find that the language of the Information Circular was  
crafted to ensure that most if not all unitholders would choose Option 1.  
[43] Grenon was also cross-examined on the objectives of the  
reorganization. When asked to confirm that it was primarily undertaken to  
Page: 10  
trigger dispositions that would ultimately result in additions to the capital  
dividend accounts of the Appellants, Grenon simply responded “that there were  
other reasons”. On this issue, I find that Grenon was evasive and not entirely  
forthcoming on the true purpose or objective of the reorganization.  
(2) Transfer of FMO units (58%) from TOM to the Appellants  
[44]  
On December 23, 2005, that is prior to the Special Meeting, the  
Appellants collectively acquired all the units of FMO held by TOM for an  
aggregate purchase price of $160,628,000 (calculated at $14.50 per unit) and  
issued demand promissory notes personally guaranteed by Grenon in  
satisfaction of the purchase price, as follows:  
Corporation  
05  
Magren  
94  
Total  
# of Units Acquired  
3,323,348  
Promissory Note  
$48,188,000  
$40,157,000  
$72,283,000  
$160,628,000  
1
2,769,457  
4,985,022  
11,077,827  
9
(3) Transactions that took place on December 28, 2005  
[45]  
A number of transactions were to occur on December 28, 2005 as  
described in paragraphs 2.1(a) to (p) of Appendix A of the Reorganization  
Agreement. These steps were scheduled to occur every 15 minutes commencing  
at 11:00 a.m. and ending at 5:00 p.m.  
[46]  
The public unitholders transferred their units of FMO to FULP and  
received new units of FIF in exchange. The Appellants then collectively  
purchased the FMO units for an aggregate purchase price of $114,718,000  
(calculated at $14.635 per unit) and issued demand promissory notes to TOM,  
again guaranteed by Grenon, on account of the purchase price, as follows:  
Corporation  
Units purchased  
from FULP  
2,351,584  
Promissory Note  
Total FMO units held  
1
05  
Magren  
94  
Totals  
$34,415,400  
$28,679,500  
$51,623,100  
$114,718,000  
5,674,932  
4,729,110  
8,512,397  
18,916,439  
1,959,653  
3,527,375  
7,838,612  
9
[47]  
At this point, the Appellants collectively held 100% of the units of  
FMO.  
Page: 11  
[48]  
FMO then transferred all the units of FVT to TOM for $232,313,070.  
In satisfaction of the purchase price, TOM transferred the demand promissory  
notes that it had received from the Appellants having a face value of  
$
160,628,000 and issued a demand promissory note of $71,685,070 for the  
balance.  
[49]  
The Appellants claim that the disposition of the FVT units resulted in  
a capital gain of $215,239,000 for FMO and that, for the 2005 taxation year,  
FMO had realized other capital gains such that it reported total capital gains of  
$
237,071,000.  
[50] FMO allocated capital gains of $226,258,087 to the Appellants, as its  
unitholders, and made additional distributions of $50,583,923, as follows:  
Recipient  
Allocation of capital  
gains  
Additional  
distributions  
$15,175,175  
$12,645,987  
$22,762,761  
$50,583,923  
Total Distribution  
1
05  
Magren  
94  
Total  
$67,877,426  
$56,564,522  
$101,816,139  
$226,258,087  
$83,052,600  
$69,210,509  
$124,578,900  
$276,842,009  
9
[51] The Appellants then added one-half of the capital gains allocated to  
them by FMO to their respective capital dividend accounts as follows:  
Recipient unit  
holders  
Allocation of  
capital gains  
$67,877,426  
$56,564,522  
$101,816,139  
$226,258,087  
Addition to capital  
dividend account  
$33,938,712  
1
05  
Magren  
94  
Total  
$28,282,261  
$50,908,069  
$113,129,042  
9
[52]  
The Appellants argue that the adjusted cost base of the FMO units was  
the total purchase price of the units acquired from TOM and FULP (as acquired  
from the public unitholders), less the amount of the excess distributions  
received, all of which was calculated as follows:  
ACB of  
FMO Units  
Held  
ACB of FMO  
Units Held  
ACB of FMO  
Units Held  
ACB of FMO  
Units Held  
ACB of FMO  
Units Held  
1
05  
Magren  
94  
Total  
$48,188,000  
$40,157,000  
$72,283,000  
$160,628,000  
$34,415,400  
$28,679,500  
$51,623,100  
$114,718,000  
($15,175,175)  
($12,645,988)  
($22,762,726)  
($50,583,923)  
$67,428,225  
$56,190,512  
$101,143,338  
$224,762,077  
9
Page: 12  
[53]  
The Appellants argue that since FMO derived its value from FVT and  
the underlying operating partnerships and since FVT had been transferred to  
TOM, the units of FMO had a nominal value. The next step involved the  
repurchase by FMO of those units for cancellation resulting in a capital loss for  
the Appellants.  
[54]  
The FMO units held by 105 were repurchased for an aggregate  
purchase price of $6 resulting in a capital loss of $67,428,410. The units held by  
Magren were repurchased for an aggregate purchase price of $5 resulting in a  
capital loss of $56,190,330 and the units held by 994 were repurchased for an  
aggregate purchase price of $9 resulting in a capital loss of $101,142,608. The  
Appellants collectively retained about 100 units having only a nominal value.  
[55]  
The Appellants indicate that the following table summarizes the  
capital gains allocated to them by FMO, the additions made to their respective  
capital dividend accounts and the capital losses arising from the repurchase of  
the FMO units:  
Appellants  
Capital gain allocated  
by FMO  
Addition to capital  
dividend account  
Capital loss on  
repurchase of  
FMO units  
1
05  
Magren  
94  
Total  
$67,877,426  
$56,564,522  
$101,816,139  
$226,258,087  
$33,938,712  
$28,282,261  
$50,908,069  
$113,129,042  
($67,428,410)  
($56,190,330)  
($101,142,608)  
($224,761,348)  
9
[
56]  
T2 Returns under Part I of the ITA for the taxation years ending on December  
1, 2005 for 994 and June 15, 2006 for 105 and Magren.  
These transactions were reported by the Appellants in their respective  
3
[57]  
Notices of Assessment were issued in due course on the following  
dates:  
Appellants  
05  
Date of Notice of Assessment  
December 8, 2006  
1
Magren  
94  
December 18, 2006  
August 8, 2006  
9
(4) Transactions that took place after December 28, 2005  
Page: 13  
[58]  
What follows is the Appellants’ description of the payment of the  
capital dividends made by the Appellants to the holders of its common or  
preferred shares, as summarized in the table below. On January 27, 2006, 994  
declared and paid two separate dividends and elected pursuant to subsection  
8
3(2) of the ITA that they be treated as capital dividends payable from its  
capital dividend account. These dividends were in the amounts of $44,000,000  
and $3,500,000 for a total of $47,500,000.  
[59]  
On June 14, 2006, Magren declared and paid three separate dividends  
and elected pursuant to subsection 83(2) of the ITA that they be paid as capital  
dividends from its capital dividend account. These dividends were in the  
amounts of $25,453,000, $1,414,500 and $1,414,500 for a total of $28,282,000.  
[60]  
On June 14, 2006, 105 declared and paid three separate dividends and  
elected pursuant to subsection 83(2) of the ITA that they be paid as capital  
dividends from its capital dividend account. These dividends were in the  
amounts of $30,544,500, $1,697,000 and $1,697,000 for a total of $33,938,500.  
Payee  
94  
Magren  
05  
Total  
Date of declaration  
January 27, 2006  
June 14, 2006  
Total dividends from CDA  
$47,500,000  
9
$28,282,000  
$33,938,500  
$109,720,500  
1
June 14, 2006  
(5) The Respondent’s Assumptions  
[61]  
The Minister’s assumptions are set out in subparagraphs 15(a) to  
(
mmm) of the Fresh as Amended Replies dated November 18, 2018.  
[62] A document referred to as “New Appendix B” was attached to the  
amended Replies. It was intended to describe the various steps undertaken in  
the FMO reorganization. The slides numbered from 1 to 20 are attached hereto  
as Annex C. In cross-examination, Grenon agreed that these slides (except  
slides 18 and 19) described the various steps undertaken but in greater detail. It  
is understood that the slides contain allegations of mixed law and fact.  
[63]  
The Minister has assumed that Magren and 105 were wholly-owned  
by 217675 Oil & Gas Ltd. (“217”) and that 994 was owned by Grencorp  
Management Inc. (“GMI”). 217 and GMI were wholly-owned or controlled by  
Grenon.  
Page: 14  
[64]  
The Minister has assumed broadly that the FMO reorganization  
involved an exchange on a one-for-one basis for new units of FIF that was  
intended to have the same underlying assets and undertakings and that the  
primary purpose of the series of transactions was to trigger the capital gains that  
would be allocated to the Appellants and lead to the payment of capital  
dividends, as described above.  
[65]  
The Respondent has assumed broadly that the steps undertaken after  
the transfer of the FMO units from the RRSP Trust to TOM, were legally  
ineffective or were a sham and a misrepresentation. In particular, the Minister  
has assumed (as confirmed in the TCC Decision) that the units of TOM issued  
to the RRSP Trust in exchange for the units of FMO were not a qualified  
investment for RRSP purposes. The Minister has also assumed that this transfer  
involved a transfer of legal title but that there was no change of beneficial  
ownership since the FMO units remained beneficially owned by the RRSP  
Trust and thus by Grenon as the annuitant thereof.  
[66]  
Moreover, the Minister has assumed that the transfer of the FMO units  
from TOM to the Appellants was a sham transaction intended to trigger the  
capital gains and payment of the capital dividends and that the various demand  
promissory notes issued by the Appellants and personally guaranteed by  
Grenon, including the notes for $160,628,000 and $114,718,000, were  
“fictitious” since it was never intended that they be used other than “for set-off  
purposes”.  
[67]  
Similarly, the Minister has assumed that there was no transfer of  
beneficial ownership when FMO purported to transfer the units of FVT to TOM  
since “immediately before and immediately after the sale of FVT, the property  
remained beneficially owned by Grenon” and as a result there was no  
disposition and no resulting capital gain that could be allocated to the  
Appellants. The Minister has also assumed that these transactions were a sham  
and a misrepresentation.  
[
68] The Minister has assumed that FMO engaged the services of a transfer  
agent and depository known as Computershare Investor Services Inc.  
“Computershare”) in connection with the exchange of units. It was assumed  
(
that Computershare had no record of a transfer of the FMO units from TOM to  
the Appellants or from FULP to the Appellants nor of a repurchase of those  
units for cancellation.  
Page: 15  
[69]  
The Minister has also assumed that when the RRSP Trust transferred  
legal title of the FMO units to TOM on November 14, 2005, they had a fair  
market value of $152,873,000 and a carrying value of $34,663,758, as indicated  
in the TOM Consolidated financial statements for the year ending December  
3
1, 2005, and that, when legal title to those units was transferred to the  
Appellants on December 23, 2005, they had a fair market value was  
160,628,477 with a carrying value of $35,547,407.  
$
[70]  
In particular, the Minister has assumed that accounting firm Grant  
Thornton prepared audited financial statements for TOM for the 2005 calendar  
year, on the basis that the carrying value of the FMO units was $34,663,758  
because there had been no change of beneficial ownership of those units.  
[71]  
The Minister has assumed that on December 28, 2005, the total value  
of FMO based on a trading value of $14.635 per unit was $276,842,070 and that  
this included the value of the operating partnerships, namely $221,474,070 for  
FILP and $55,368,000 for FULP.  
[72]  
The Minister has assumed various steps leading to the transfer of the  
assets of the operating partnerships to the new operating partnerships. As part of  
this series of transactions, FULP had subscribed for 18,916,438 new units of  
FIF to mirror the total outstanding units of FMO. FULP acquired the 7,838,612  
units of FMO held by the public unitholders and in exchange, transferred new  
units of FIF, as contemplated in Option 1.  
[
73]  
units of FMO now held by FULP and issued demand promissory notes of  
114,718,000 but that, since the underlying assets had already been transferred  
The Minister has assumed that the Appellants purported to acquire the  
$
in the series of transactions noted above, these units no longer had any value  
since FMO derived its value from the lower-tier operating partnerships that had  
been transferred to FIF.  
[74]  
The Minister has assumed that the purpose of these transactions was  
to have the Appellants acquire “additional FMO units with artificially created  
cost bases so as to facilitate the creation of the claimed capital gain arising from  
the sale” of FVT to TOM followed by “capital losses realized on the subsequent  
redemption by FMO of its units” and finally the “addition to” their respective  
capital dividend accounts.  
Page: 16  
[75]  
The Minister has also assumed that FULP and FILP realized other  
income in the approximate amount of $137 million in 2005 and that this amount  
was allocated to FVT and finally allocated to TOM and distributed to its  
unitholders on a pro-rata basis, including the RRSP Trust.  
[76]  
The Minister has assumed that once the Appellants had acquired legal  
title to 100% of the units of FMO, FMO purported to sell the units of FVT to  
TOM for $232,313,070 and reported a capital gain of $226,258,086 for its 2005  
taxation year. In consideration of this, TOM issued a promissory note of  
$
71,685,000 and transferred the promissory notes totalling $160,628,477 that it  
had earlier received from the Appellants when they purported to acquire the  
FMO units on December 23, 2005.  
[77]  
The Minister has assumed that FMO then purported to repurchase all  
of its units for cancellation (except for 100 units) and that, since FMO had  
already distributed all of its underlying assets, this resulted in capital losses of  
$
224,761,348 for the Appellants’ that was used to offset the capital gain  
allocated to them by FMO following the disposition of the FVT to TOM, as  
described above.  
[78]  
The Minister has assumed that FMO purported to allocate the capital  
gains to the Appellants as described above. The amount allocated to the  
Appellants was satisfied by the distribution of 3,042,638 units of FIF (having a  
value per unit of $14.635) and the promissory notes of $71,685,000 and  
$
160,628,477 noted above. These promissory notes were then cancelled.  
[79] The Minister has assumed that the Amended Reorganization  
Agreement signed on December 28, 2005 was made to amend the steps  
identified as Article 2.1, paragraphs (a) to (p) of Appendix A of the  
Reorganization Agreement, purportedly to add a new step (q), but that this  
additional step was not disclosed to the public unitholders. It involved the legal  
right of certain unspecified unitholders to acquire the legal obligation of FMO  
to sell its remaining assets in FVT. The Minister has assumed that the  
unspecified unitholders were the Appellants.  
[80]  
The Minister has assumed that at the conclusion of the FMO  
reorganization, The Appellants and TOM retained an approximate 58% interest  
in aggregate of FIF.  
Page: 17  
[81]  
The Minister has assumed that the Appellants then declared and paid  
dividends as described by the Appellants and filed elections pursuant to  
subsection 83(2).  
[82]  
The Minister has assumed that on January 30, 2006, GMI declared  
and paid two capital dividends to Grenon totalling $110,558,119 and that on  
October 12, 2012 217 declared and paid two capital dividends to Grenon  
totalling $62,220,500.  
[83]  
The Minister has assumed that the Appellants collectively  
misrepresented the true nature of the series of transactions comprising the FMO  
reorganization to the public unitholders and to the Minister and that, what was  
described as a reorganization undertaken for business purposes, was designed to  
create the capital dividend account balances for the benefit of the Appellants  
and ultimately for the benefit of Grenon by the payment of capital dividends on  
a tax free basis.  
Page: 18  
VI. PRELIMINARY ISSUES  
A. Are the Part III Reassessments statute-barred?  
[84]  
It is not disputed that the Part I Reassessments that denied the subject  
capital gains and capital losses were in fact notifications that no tax was  
payable, also known as “nil assessments”, as noted at the outset of these  
Reasons for Judgment.  
[85]  
The Appellants argue that the Part I Reassessments that purported to  
reduce the subject capital gains and capital losses to nil were statute-barred  
because they were issued outside the normal reassessment period, being more  
than three years after the initial assessments made in 2006. The Appellants  
argue that the Minister cannot challenge the validity of transactions reported  
under Part I because they are statute-barred and the requirements of subsection  
1
52(4) have not been met in that “the Appellants have not signed a waiver and  
there has been no misrepresentation attributable to neglect, carelessness, wilful  
default or fraud”.  
[86]  
The Appellants argue that the Part III Reassessments that are the  
subject matter of these appeals are based solely on the Minister’s challenge of  
the transactions giving rise to the subject capital gains and capital losses  
reported for Part I purposes in a taxation year that is statute-barred such that the  
Reassessments are also “statute-barred and (…) therefore invalid and without  
legal force”.  
Position of the Respondent  
[87]  
The Respondent argues that Part III imposes a separate tax, requires  
separate returns and creates separate timing requirements such that its validity  
cannot be dependent on the Part I Reassessments. It is argued in any event that  
the issue before the Court is whether the Part III Reassessments are correct in  
law and in fact (Superior Filter Recycling v. The Queen, 2006 FCA 248 (para  
6
)) and that the Court does not have the jurisdiction to deal with nil  
assessments.  
[88]  
The Respondent adds that in considering the validity of the Part III  
Reassessments, “it is entirely open to the Court to consider the underlying  
transactions” even though “the same transactions had tax consequences for the  
Part I nil Reassessments that are not before the Court.”  
Page: 19  
[89]  
The Respondent concludes by indicating that the Part III  
Reassessments were issued after a review of the notices of objection filed by the  
Appellants on March 19, 2014 and the Minister had the authority to respond  
pursuant to subsection 165(3).  
Analysis and Conclusion  
[90]  
It is well-established that a taxpayer cannot appeal a nil assessment  
because no tax is payable. As noted in Bormann v. Canada, 2006 FCA 83, “the  
jurisprudence is clear that a taxpayer can neither object to nor appeal from a nil  
assessment” (para. 8). If an amount remains relevant, for example a non-capital  
loss, the taxpayer may be required to wait “until the year in which that amount  
is relevant”: Dow Chemical Canada ULC v. The Queen, 2020 TCC 139 (para  
6
8).  
[91]  
Finally, as noted by the Federal Court of Appeal (Noel, J.A., as he  
then was) in Canada v. Interior Savings Credit Union, 2007 FCA 151 (“Interior  
Savings”), “the expression nil assessment does not appear anywhere in the Act”  
but “when dealing with a situation where a person owes no taxes, the Act  
authorizes the Minister to issue a notice “that no tax is payable” (subsection  
1
1
52(4))” (para 16). The Court relied on Okalta Oils Limited v. MNR, 55 DTC  
176 (SCC) (p. 1178) where it was explained that this is so because “an  
assessment which assesses no tax is not an assessment” and an objection that  
does not relate to an amount claimed as taxes is “lacking the object giving rise  
to the right of appeal” (para 17).  
[92]  
In this instance, it is not disputed that the Appellants have not filed an  
appeal in connection with the Part I Reassessments. Had they done so, the Court  
would likely have been required to apply “the nil assessment jurisprudence” and  
quash the appeals: Canada (Attorney-General) v. Bruner, 2003 FCA 83 (para  
3
).  
[93]  
I find that there is no exception for nil assessments that are issued  
beyond the normal reassessment period because the Court would nonetheless  
have to conclude that no taxes had been assessed and thus no amount was owed.  
The Appellants cannot argue that the nil reassessments are statute-barred and  
then ask the Court to extrapolate from that and conclude that the Part III  
Reassessments that are the subject matter of these appeals are also statute-  
barred and “therefore invalid and without legal force.” These arguments must  
be rejected.  
Page: 20  
[94]  
Moreover, I agree with the Respondent, that nothing prevents the  
Court, in the context of these appeals, from reviewing the validity of  
transactions that are alleged to have triggered the subject capital gains and  
capital losses and that are alleged to form the basis for the additions made to the  
capital dividend accounts.  
[95]  
If I am wrong in so concluding, then I find that the Part I  
Reassessments were not statute-barred and that the Minister was entitled to  
issue them because, as will be explained in greater detail below, the Appellants  
had made a misrepresentation that was attributable to neglect, carelessness or  
wilful default or fraud, as required by subparagraph 152(4)(a)(i) of the ITA.  
B. The Requirements of Subsection 185(1) of Part III  
[96]  
The Appellants argue that the Part III Reassessments “are invalid and  
without legal force” and should be vacated because the Minister i) failed to  
conform to the requirement that each election filed be assessed in respect of a  
single dividend and not in respect of multiple dividends and ii) failed to assess  
“with all due dispatch”.  
[97] The concept of a “capital dividend account” (“CDA”) will be  
reviewed in greater detail below but it will suffice for the analysis of this  
particular issue to explain that subsection 83(2) provides that a corporation may  
declare a dividend and elect that it be a capital dividend payable from the  
corporation’s CDA in which case the dividend is not taxable in the hands of the  
recipient shareholder. The election must be filed in prescribed form and  
manner. If the dividend exceeds the CDA balance, the corporation may be  
subject to Part III tax on the excess.  
[98] Subsection 185(1) sets out the obligation of the Minister upon receipt  
of an election filed by a corporation and provides as follows:  
1
85(1)–The Minister shall, with all due  
185(1)-Le ministre examine avec diligence  
dispatch, examine each election made by a  
corporation in accordance with subsection  
chaque choix que fait une société  
conformément au paragraphe 83(2),  
130.1(4) ou 131(1), établit en tenant compte  
de ce choix l’impôt éventuel payable en  
vertu de la présente partie et envoie un avis  
de cotisation à la société.  
8
3(2), 130.1(4) or 131(1), assess the tax, if  
any, payable under this Part in respect of  
the election and send a notice of assessment  
to the corporation.  
(i) Was the Minister Required to Assess Each Separate Election?  
Page: 21  
[99]  
The Appellants argue that they collectively declared and paid eight  
dividends (as outlined above) and that the Minister issued only one assessment  
of Part III tax for each of the Appellants “in respect of multiple subsection  
8
3(2) elections”.  
[100] The Appellants argue that subsection 185(1) imposes “a strict  
assessing requirement” and that the Minister must “issue separate notices of  
assessment (…) in respect of each of the dividends”. It is argued that “issuing  
one assessment of Part III tax payable in relation to more than one dividend  
(…) is not in compliance” with the provision “and is therefor invalid and  
without legal force”.  
[101]  
In particular, the Appellants rely on subsection 248(2) that provides  
that “tax payable by a taxpayer under any part of this Act by or under which  
provision is made for the assessment of tax means the tax payable by the  
taxpayer as fixed by the assessment or reassessment” (emphasis by the  
Appellants).  
[102]  
It is argued that the Reassessments “do not contain mere errors,  
defects, or omissions such that they can be saved” by subsection 152(8) or  
section 166 and that the “error is so fundamental as to invalidate the  
assessments.”  
[103]  
It is argued that “there has been a substantial and blatant breach of the  
assessing requirements” such that they are “void ab initio” and that the Court  
should conclude that “there are no valid assessments against the Corporate  
Appellants under Part III of the Tax Act”.  
[104]  
In Reply submissions, the Appellants argue that subsection 185(1)  
requires that the Minister “examine each election made by a corporation” (their  
emphasis) and that subsection 185(2) requires that the Minister mail an  
assessment “under this Part in respect of the election” (their emphasis). It is  
argued that since interest runs from the date of mailing of the assessment, “it  
cannot be intended that the Minister could issue one assessment for two or more  
elections (…) made on different days.”  
Page: 22  
The Position of the Respondent  
[105] The Respondent answers that subsection 185(1) does not require that  
the Minister issue separate notices of assessment for each election made by a  
taxpayer and that there is nothing in the text, context or purpose of the provision  
that would require only one single assessment per election made pursuant to  
subsection 83(2).  
[106]  
It is argued that the Minister has “examined and assessed Part III tax  
payable for each of the elections” filed and as such the Minister’s obligation has  
been satisfied.  
[107]  
The Respondent argues that the Appellants have not pointed to any  
statutory authority or case law that would support the proposition that the Part  
III Reassessments must relate to only one election made pursuant to subsection  
8
3(2).  
[108]  
The Respondent points to subsection 152(3) and argues that liability  
for tax “is not affected by an incorrect or incomplete assessment or by the fact  
that no assessment has been made” and is not dependent on the number of  
assessments made and further that subsection 152(8) provides that an  
assessment “is deemed valid and binding notwithstanding any error or defect or  
omission in the assessment”.  
[109]  
The Respondent also relies on section 166 that provides that “an  
assessment shall not be vacated (…) by reason only of an irregularity,  
informality, omission or error (…) in the observation of any directory provision  
of the Act”.  
Analysis and Conclusion  
[110]  
I agree with the Respondent that the requirement that the Minister  
“
1
1
examine each election” and “assess the tax, if any”, as required by subsection  
85(1) must be considered in light of subsections 152(3) and 152(8) and section  
66.  
[111]  
In particular, I find that the provision, as it pertains to the obligation to  
“examine each election” is directory at best (and not mandatory) and that there  
has been no prejudice to the Appellants: Kyte v. Canada, 1996 CanLII 3939  
FCA).  
(
Page: 23  
[112]  
This Court is also bound by the decision of the Federal Court of  
Appeal in Ginsberg v. Canada, 1996 CanLII 4062 (FCA), [1996] 3 FC 334  
“Ginsberg”), where Desjardins J.A. considered the distinction between the  
(
words “mandatory” and “directory” (finding that they were not very helpful)  
and the competing interests involved in “the need to levy revenues for  
government and public expenditures” and “the need to protect the individual by  
bringing certainty to his financial affairs at the earliest reasonable possible  
time”. The Court indicated that those competing interests were settled in favour  
of the government with the adoption of subsections 152(3), 152(8) and section  
1
66 (para 22).  
[113] In the end, I agree with the Respondent that the language of  
subsection 185(1) does not preclude or exclude the possibility that the Minister  
may review more than one election or issue only one assessment dealing with  
multiple elections – particularly when those elections relate to dividends that  
have been declared and paid by the corporation in the same taxation year. The  
Court is unable to conclude that the issuance of one assessment in relation to  
more than one election is “a substantial and blatant breach of the assessing  
requirements”, as submitted, or that it should lead to the conclusion that the Part  
III Reassessments at issue herein are somehow void ab initio, invalid or without  
legal force, as suggested by the Appellants.  
[
114]  
This argument is without merit and must be rejected.  
ii) The Requirement to Proceed With “all due dispatch”  
The Appellants indicate that the Minister issued original assessments  
(
[115]  
in 2014, almost eight years after the elections were filed and that they were in  
error because they applied an incorrect tax rate in calculating the amount  
assessed. Those assessments were later amended in November 2016, being  
more than ten years after the Minister received the elections from the  
Appellants.  
[116]  
It is argued that the “Minister has a statutory obligation to assess with  
all due dispatch”; that “in the present case, due dispatch was emphatically not  
observed” and finally that this “Court has the power to vacate an assessment”.  
The Appellants argue that the phrase “all due dispatch” cannot be meaningless  
and must be given effect. The Appellants also argue that the “Minister had the  
opportunity to explain the delay to the Court and the Appellant at trial, but the  
Minister did not do so”.  
Page: 24  
[117]  
The Appellants recognize that there is authority rooted in the decision  
of Ginsberg, supra, “interpreting s. 152(3) and to a lesser extent s. 166 (…) as a  
basis for concluding that this Court cannot vacate an assessment for a lack of  
dispatch” and that another decision points to the possibility of interest relief as  
an alternative remedy: Carter v. The Queen, 2001 FCA 275 (“Carter”). The  
Appellants nonetheless argue that in this instance the “Court should use its  
power to vacate or vary the assessment (…) on the grounds of a want of due  
dispatch”.  
[
2
1
118]  
The Appellants rely on McNally v. Minister of National Revenue,  
015 FC 767 (“McNally”) and J. Stollar Construction Ltd. v. MNR, 89 DTC  
34 (TCC) (“Stollar”) for the broad proposition that the Minister has a statutory  
duty to examine a return with all due dispatch “to protect the individual  
taxpayer by bringing certainty to his financial affairs at the earliest reasonable  
possible time”.  
[119]  
The Appellants argue that the Respondent called no evidence to  
establish that the review of the elections filed proceeded at a pace that was  
reasonable in the circumstances and called no evidence to justify the delay.  
They rely on Hillier v Agc., 2001 FCA 197 (“Hillier”), a decision that involved  
judicial review of a ministerial decision not to cancel or waive interest or  
penalties. In that context, the Court found that the decision was unreasonable  
because the officer, in refusing to grant interest-relief, had failed to consider the  
processing delays. The Court referred to the earlier trial decision of Ginsberg v.  
The Queen, 94 DTC 1430 (TCC), where Christie, A.C.J. had indicated that  
“there is an onus on the respondent to establish by evidence pertaining to the  
manner in which that return was dealt with such that the delay was not  
unreasonable”. As indicated by the Appellants, a similar view was expressed in  
the earlier decision of Stollar, supra where the Tax Court had concluded that the  
“the Minister cannot assess whenever he pleases” and “section 166 does not  
apply to save the assessment” (paras 9 - 10).  
[120] The Appellants also rely on Imperial Oil Ltd. v. The Queen, 2003  
FCA 289 (“Imperial Oil”), where the Court indicated as follows:  
9
. (…) The statutory obligation of the Minister is to assess “with all due  
dispatch.” That is an elastic standard that gives the Minister sufficient discretion  
to determine that a particular return should not be assessed until after a detailed  
review. As long as the necessary review proceeds at a pace that is reasonable in  
the circumstances, the Minister will not be in default of the statutory obligation to  
assess with all due dispatch.  
Page: 25  
[121]  
The Appellants argue that “a contextual and purposive interpretation  
of the opening words” of subsections 152(1) and 152(4), suggest that “the  
Minister may at any time make an assessment (…) provided she has assessed  
with all due dispatch”.  
[122]  
It is argued that subsection 185(3) incorporates by reference  
subsection 152(4) that allows the Minister to assess beyond the normal  
assessment period only “if the taxpayer has made any misrepresentation  
attributable to neglect, carelessness or willful default.” However, it is argued  
that the “clock” starts running only after “the Minister has met her duty to have  
initially assessed with all due dispatch.” It is argued that “subsection 152(4)  
cannot be reasonably construed as authorizing the Minister to disregard the  
statutory duty to initially assess with all due dispatch.”  
[123]  
The Appellants reminds the Court that “this case deals with an initial  
assessment” and that is material because “taxpayers have no practical remedy to  
expedite the assessing stage” noting that where a notice of objection to an  
assessment has been filed, the taxpayer may file an appeal and proceed directly  
to the Tax Court.  
[124] The Appellants add that the word “shall” is to be construed as  
“imperative” and the expression “may” as permissive based on section 11 of the  
Interpretation Act, R.S.C. 1985, c. I-21, such that the expression “shall, with all  
due dispatch” must be given “an imperative construction”. It is noted that in  
Ginsberg, supra, the delay was 18 months and not a decade later and that “after  
a decade of delay, the risk of prejudice to the taxpayer is greatly different” and  
might for example, limit the taxpayer’s ability to seek interest relief or to  
adduce evidence before the Court.  
[125]  
It is argued that the delay in this instance is “inordinate”. Since  
subsection 152(4) imposes a time limit during which an assessment may be  
made, “it cannot be open to the Minister to reassess a taxpayer in perpetuity”  
and subsection 152(3) and section 166 “cannot be interpreted as conferring a  
right on the Minister to delay an initial assessment without limit”. It is argued  
that both subsections 152(1) and 185(1) impose a time limit that may vary  
dependent on the particular circumstances, “but it is still a deadline”.  
[126]  
It is argued finally that there must be a sanction for the Minister’s  
failure to assess with all due dispatch “otherwise the provisions have no  
meaning”. It is argued finally that “if ever there was a case in which all due  
Page: 26  
dispatch should mean something, it is this one” and “nothing prevents the Court  
from exercising its authority to vacate or vary the assessments on grounds of a  
want of due dispatch” and that would be the appropriate remedy in this  
instance.  
The Position of the Respondent  
[127]  
The Respondent takes the position that the Part III Reassessments  
cannot be vacated on the basis that the Minister failed to issue them with “all  
due dispatch” as set out in subsection 185(1) and that this issue was finally  
settled in Carter, supra, where a unanimous panel of the Federal Court of  
Appeal (Rothstein J.A, as he then was) relying on Ginsberg, supra, (described  
as “Ginsburg”) indicated that:  
[
5] The appellant also says that the Minister did not act with due dispatch in  
assessing him as required by subsection 152(1) of the Income Tax Act. The  
appellant asks that on this basis his appeal be allowed (…) or at least that interest  
on outstanding taxes be waived. On this appeal against an assessment, there is no  
power in the court to vacate an assessment on the grounds that the Minister did  
not act with due dispatch. See R. v. Ginsburg, 1996 CanLII 4062 (FCA), [1996] 3  
F.C. 334 (C.A.). (…)  
[
Emphasis by the Respondent]  
[128]  
The Minister argues that that the Appellants in this instance rely  
heavily on the earlier decision of Stollar, supra where Bonner J. allowed an  
appeal on the basis that the Minister had failed to act “with all due dispatch” as  
required by subsection 152(1) and that the assessment could not be saved by  
section 166.  
[129]  
It is argued that Stollar is no longer good law and that Carter, supra  
and the other appellant cases of Ginsberg, supra, Bolton v. The Queen, (1996)  
9
5
6 DTC 6413 (Fed CA) (“Bolton”) (para 3) and James v. MNR, 2001 DTC  
074 (Fed CA) (“James”) (para 18), where there was a ten year delay, have  
settled the law that the remedy for the alleged failure to assess with “all due  
dispatch” is not to vacate the assessment.  
[130]  
The Respondent argues that six months after the James decision, the  
FCA revisited the issue in Hillier, supra, where it had expressed support for the  
view of Bonner J. in the Stollar decision, that the Minister had an obligation to  
assess a taxpayer within a reasonable amount of time, “but did not go so far as  
to endorse vacating an assessment for the failure of the Minister to do so.” It is  
Page: 27  
argued that the Carter decision was rendered after the Hillier decision relied  
upon by the Appellants, and that “the Court was unequivocal that it was without  
power to vacate an assessment on the basis of failure of the Minister to assess  
with all due dispatch”.  
[131]  
It is argued that the issue was more recently reviewed by this Court in  
Rio Tinto Alcan Inc. v. The Queen, 2017 TCC 67 (“Rio Tinto”) where Justice  
D’Auray concluded that it could not vacate an assessment where the Minister  
had allegedly failed to assess with all due dispatch.  
[132]  
The Respondent indicates that the Appellants could have appealed  
directly to this Court pursuant to subsection 169(1) after they had filed their  
Notices of Objection to the initial assessment made in October 2014. The  
Appellants did not do so.  
[133]  
The Minister states that the complaint of the Appellants appears to be  
“that they have no practical remedy to accelerate the audit and assessing  
process” but “that this is incorrect since they could have availed themselves of  
the right to seek a mandamus order from the Federal Court to compel the  
Minister to issue the Part III assessments”. The Appellants “chose not to avail  
themselves of this remedy”.  
[134]  
The Respondent notes moreover that in McNally, supra, relied upon  
by the Appellants, this was precisely what occurred. The Federal Court issued  
an order compelling the Minister to assess a tax return that had been filed more  
that two years prior.  
[135]  
The Respondent argues finally that the words “with all due dispatch”  
for the purposes of subsection 152(1) of Part I is equally applicable to  
subsection 185(1) of Part III and that in Ginsberg, supra, the Federal Court of  
Appeal concluded that this expression was directory rather than mandatory and  
as such the failure to assess with all due dispatch could not form a basis to vary  
or vacate an assessment, as recently confirmed by Rio Tinto, supra.  
[136]  
Further and in the alternative, the Respondent argues that the  
Appellants made representations that were attributable to neglect, carelessness  
or wilful default or fraud in filing their tax returns for the 2006 taxation years  
and in providing the information contained in the capital dividend elections  
filed in that same year. As a result, the Minister was entitled to assess beyond  
the normal reassessment period pursuant to subparagraph 152(4)(a)(i).  
Page: 28  
Analysis and Conclusion  
[137] I find that the Court is bound by the decisions of the Federal Court of  
Appeal in Carter, and Ginsberg, supra and that even if the Court was of the  
view that the assessment process involved an “inordinate” amount of time, as  
suggested by the Appellants, “there is no power in the court to vacate an  
assessment on the grounds that the Minister did not act with due dispatch.” Had  
Parliament intended to give the Court that power, it would have said so in clear  
terms but it has not done so.  
[138]  
As noted by the Respondent, the decisions of James and Bolton, supra  
also support this position. In James, the Court stated that “J. Stollar  
Construction is the only case in which reassessments were vacated. That is a  
decision of the Tax Court, and it must be taken as overruled by this Court in  
Bolton.”  
[139]  
The relevant case law was recently reviewed by this Court in Rio  
Tinto, supra where Justice D’Auray referred to subsections 152(3) and 152(8)  
as well as section 166 as “the saving provisions” before concluding that  
“
section 166 of the ITA provides that an assessment is valid notwithstanding  
the Minister’s failure to meet one of the requirements of subsection 152(1)”  
para 189). This is relevant because the expression “shall, with all due dispatch”  
also appears in subsection 185(1).  
(
[
140]  
Federal Court of Appeal in Imperial Oil, supra indicating that the expression  
with all due dispatch” is “an elastic standard that gives the Minister sufficient  
I find that this is also consistent with the conclusion reached by the  
“
discretion to determine that a particular return should not be assessed until after  
a detailed review”. I note that the Appellants have acknowledged that  
subsections 152(1) and 185(1) impose “a time limit that may be dependent on  
the particular circumstances”.  
[141]  
As to the suggestion that the Minister was duty bound to provide the  
Court and the Appellants with some form of evidence or explanation for the  
delay, I am not convinced that the Minister had a positive obligation to do so in  
the context of these appeals although evidence of that nature would likely be  
relevant to an application for judicial review where the taxpayer seeks interest  
relief: Carter, supra.  
Page: 29  
[142]  
It is apparent that there are important nuances. I find that a  
consideration of the expression “shall, with all due dispatch” in the context of  
an application for judicial review of a decision to waive interest and penalties  
(as was the case in Hillier) and the importance of evidence to be adduced by the  
Minister to demonstrate that the assessment process proceeded at a reasonable  
pace, is not to be mistaken or confused with a request that an assessment be  
vacated “because” the Minister failed to act “with all due dispatch”. I agree  
with the Respondent that the latter issue has been resolved by the Federal Court  
Appeal decisions of Carter and Ginsberg, supra as recently reviewed by this  
Court in Rio Tinto, supra.  
[143]  
In any event, the evidence before the Court suggests that the capital  
dividend elections at issue were filed in 2006 and that the Minister’s audit  
commenced in earnest in 2007. The Appellants must be taken to have had  
knowledge of the audit process and, as argued by the Respondent, they were not  
without a remedy. They could have filed an application (as was done in  
McNally, infra) seeking a mandamus order to compel the Minister to issue the  
Part III assessments. This would have provided them with “a practical remedy  
to expedite the assessing process”. They chose not to avail themselves of that  
remedy.  
[144]  
As noted in the TCC Decision, Grenon was a knowledgeable and  
sophisticated individual who directly or indirectly owned or controlled the  
Appellants. The Court must conclude that he knowingly declined to pursue an  
application for a mandamus order. I find that the Appellants cannot now argue,  
in the context of these appeals, that the Court should vacate the subject  
reassessments on the basis of delay.  
[145]  
If I am wrong in so concluding, I find that the Minister was entitled to  
issue the original Part III Notices of Assessment in 2014 followed by the Part  
III Reassessments in 2016, that is after the normal assessment period because,  
as will be explained in greater detail below, the Appellants had made a  
misrepresentation that is attributable to neglect, carelessness or willful default  
or fraud in the filing of their returns for the 2006 taxation years including the  
filing of the capital dividend elections.  
[146]  
This argument must also be dismissed.  
VII. THE CAPITAL GAINS AND CAPITAL LOSSES  
Page: 30  
[147]  
As noted at the outset of these Reasons for Judgment, the Minister has  
alleged that the series of transaction that lead to the realization of capital gains  
and capital losses were legally ineffective as there was no change of beneficial  
ownership or that they were a sham and a misrepresentation (or alternatively,  
the Respondent has relied on the GAAR). The Minister has alleged that the  
object of these transactions was to generate the additions to the Appellants’  
capital dividend accounts followed by the declaration of capital dividends that  
were eventually paid out to Grenon.  
A. Were the Transactions Legally Effective?  
[148]  
The Appellants assert that the Minister’s position that beneficial  
ownership did not change because Grenon “directly or indirectly remained in  
control of the transacting entities” is “entirely without merit.” This is so because  
all entities “were separate taxpayers and separate legal entities” and the ITA  
“
recognizes them as separate taxpayers and imposes tax accordingly, whether or  
not entities are subject to common control.” It is argued that it is  
uncontroversial” that “corporations are separate taxpayers” as “are trusts (…)  
by virtue of s.104(2).”  
“
[149]  
The Appellants argue that the Respondent’s position “runs contrary to  
the very fundamentals of corporate law” and that “the notion that a corporation  
could not dispose of an asset to a wholly-owned subsidiary corporation because  
both are under common control of the parent’s shareholder is self-evident”. It is  
argued that in this instance, the Minister “did not assess any of the transacting  
entities on the basis that the transactions did not occur”.  
[150]  
In Reply Submissions, the Appellants argue that the Respondent is  
attempting to justify its position by using “a confusing mix of arguments based  
on bare trusts and on principles of agency” and that the Crown has already  
admitted that a corporation has a separate legal personality from its  
shareholders, that a shareholder has no proprietary interest in the assets of a  
corporation, that an agency relationship between a corporation and its  
shareholder is not to be implied absent clear evidence and that, in this instance,  
the RRSP Trust was a separate legal entity. The Appellants maintain the none  
of the Appellants acted as agents for Grenon.  
[
2
151] The Appellants dismiss the application of Fourney v. The Queen,  
011 TCC 520 (General Procedure) (“Fourney”), relied upon by the  
Respondent, as it involved “an unsophisticated taxpayer” who attempted to  
Page: 31  
conceal assets from a “disgruntled” sibling while intending to retain beneficial  
ownership, leading the trial judge to conclude that the corporations involved  
held the assets on an agency basis or as bare trustee for the taxpayer. The  
Appellants take the position that the “exaggerated factual circumstances” of that  
decision can be distinguished because there is no evidence in this instance that  
the Appellants were “the bare nominees and agents” of Grenon. The Appellants  
also argue that the Respondent cannot rely on Prévost Car Inc v. The Queen,  
2
008 TCC 231 (“Prévost Car”) (aff’d at 2009 FCA 57) because it was  
concluded that “the relationship between the subject corporation and its  
shareholders was neither one of agency nor nominee”.  
[152] The Appellants rely on Edgington v. Mulek Estate, 2008 BCCA 505  
(
“Edgington”) where the court confirmed the basic principle “that a corporation  
is in law an entity distinct and separate from its shareholders” as held in  
Salomon v. Salomon & Co. (1896), [1897] A.C. 22(U.K. H.L.) (“Salomon”).  
[153]  
The Appellants argue that Grenon’s “potential ability to exercise  
indirect control or direction of 11 million units does not amount to an admission  
in law or in fact that there was no change in beneficial ownership”. It is argued  
that the Respondent has not explained “how and when Grenon acquired outright  
beneficial ownership in the 11 million units” of FMO from the RRSP Trust, nor  
why “the Minister did not assess the tax consequences that would have  
followed from extracting the 11 million units from the” RRSP Trust.  
[154]  
The Appellants argue that the “uncontroverted evidence” was that the  
accountants of TOM, “whether correctly or otherwise”, had reported that there  
was no change in beneficial ownership for accounting purposes. This had  
2
similarly been reported for SEDI purposes but “for tax purposes that  
transaction was in fact reported as constituting a change in beneficial ownership  
as was required.”  
[155]  
The Appellants conclude that “there is no serious doubt that the  
beneficial ownership in question did indeed, transfer”.  
2
The System for Electronic Disclosure by Insiders (SEDI) is Canada’s online, browser  
based service for the filing and viewing of insider reports as required by various  
provincial securities rules and regulations. SEDI replaces paper-based reporting and is  
intended to provide an efficient disclosure process. Source: SEDI database “Welcome to  
SEDI”, SEDI Bulletin (June 2021), online: https://www.sedi.ca/sedi/SVTWelcome.  
Page: 32  
Position of the Respondent  
[156] The Respondent explains that paragraph 3(b) of the ITA includes in  
the income of a taxpayer in a year, taxable capital gains less allowable capital  
losses and provides specific rules as to its computation in sections 38 to 55  
having regard to certain definitions in subsection 248(1) that include the term  
“disposition”. It is argued that this term “generally excludes transfers of  
property in instances where no change of beneficial ownership occurred”.  
It is explained further that “if a transaction constitutes a ‘disposition’, section 38  
provides that taxable capital gains are 50% of capital gains while allowable  
capital losses are 50% of capital losses.” The term ‘proceeds of disposition’ and  
whether they exceed or are less than the ‘adjusted cost base’ of property, is  
relevant to the computation of capital gains and capital losses.  
[
157]  
to the Appellants and the transfer of FVT to TOM, did not constitute a  
disposition” because, as a consequence of these transfers, there was no change  
in beneficial ownership within the meaning of that term in subsection 248(1).  
The Respondent states that the transfer of the FMO units from TOM  
“
[158]  
The Respondent explains that “transfers of property where legal title  
is conveyed but no change in beneficial ownership occurs” does not result in a  
disposition because paragraph (e) of the definition excludes “any transfer of the  
property as a consequence of which there is no change in the beneficial  
ownership”.  
[159]  
It is explained that subparagraphs (e)(i) to (iii) of the definition refer  
to transfers involving a trust and its beneficiaries and refer to subsection 104(1)  
for the definition of “trusts” for the purposes of the Act but provides as follows:  
1
04(1) (…) a trust is deemed not to  
104(1) – (…) l’arrangement dans le cadre  
duquel il est raisonnable de considérer  
qu’une fiducie agit en qualité de  
mandataire de l’ensemble de ses  
bénéficiaires pour ce qui est des  
opérations portant sur ses biens est réputé  
ne pas être une fiducie (…)  
include an arrangement under which  
the trust can reasonably be considered  
to act as agent for the beneficiaries  
under the trust with respect to all  
dealings with all of the trust’s property  
(…)  
[160]  
The Respondent relies on Fourney, supra, to support the proposition  
that, as quoted from that decision, transfers to a bare trust “will not be  
considered dispositions under subsection 248(1) when the trust acts entirely as  
Page: 33  
agent of the beneficiary, holding title with no change in beneficial ownership”  
(para 23). It is argued that a “bare trustee, which includes a bare trust  
corporation, is a person who holds property in trust at the absolute disposal and  
benefit of the beneficiaries and is comparable to an agent: De Mond v. The  
Queen, 99 DTC 893 (paras 36-37).  
[161]  
As noted by the Respondent, Hogan J. reviewed the jurisprudence on  
agency relationships and indicated that “the relationship between principal and  
agent may emerge by written or oral agreement or implied from the conduct or  
the situation of the parties” (para 36) and “in the absence of a written agreement  
(…) the conduct of the parties must be examined for the purposes of  
determining whether an agency agreement may be implied” relying on Avotus  
v. The Queen, 2206 TCC 550 (“Avotus”) (para 48). He also indicated that “that  
corporations can act as agents, and this concept is not repugnant to the rule that  
corporations have separate legal personality a matter addressed in the oft-cited  
Salomon case” (para 42).  
[162]  
The Respondents add that the “test to determine beneficial ownership,  
is the point in time when a person possesses the three key attributes of  
ownership, namely, risk, use and possession”: Smedley v. The Queen, 2003  
DTC 501 (TCC) Para. 10 (“Smedley”). The Respondent also argues that the  
“concept of beneficial ownership originates from the law of equity and  
developed to distinguish the legal owner of property from the person who has  
the right to truly benefit from the property”. It is argued that the “beneficial  
owner” is “the one who can ultimately exercise the rights of ownership in the  
property” relying on Covert v. Nova Scotia (Minister of Finance), [1980] 2 SCR  
7
74, page 784 (“Covert”).  
[163] The Respondent also relies on the Prévost Car, supra, where a  
Canadian corporate taxpayer was reassessed to deny treaty benefits on  
dividends it paid to a Dutch holding company interposed between it and the  
ultimate recipients who resided in another jurisdiction, because the Dutch  
company was not the beneficial owner of the dividends. Rip, A.C.J. (as he then  
was) indicated that:  
1
00. (…) It is the true owner of property who is the beneficial owner of the  
property. Where an agency or mandate exists or the property is in the name of a  
nominee, one looks to find on whose behalf the agent or mandatary is acting or  
for whom the nominee has lent his or her name. When corporate entities are  
concerned, one does not pierce the corporate veil unless the corporation is a  
conduit for another person and has absolutely no discretion as to the use or  
Page: 34  
application of funds put through it as conduit, or has agreed to act on someone  
else's behalf pursuant to that person's instructions without any right to do other  
than what that person instructs it, for example, a stockbroker who is the registered  
owner of the shares it holds for clients.(…)  
[164]  
The Respondent argues finally that a capital gain did not result from  
the transaction whereby FMO transferred the units of FVT to TOM and a  
capital loss did not result when FMO repurchased its units for cancellation from  
the Appellants. It is argued that there was no taxable disposition because  
Grenon had “retained beneficial ownership of the property transferred  
throughout.”  
Analysis and Conclusion  
[165]  
It is not disputed that the 11 million FMO units were initially held in  
the RRSP Trust, that CIBC Trust was the legal and registered owner of those  
units as plan administrator and trustee and that Grenon was the beneficial owner  
as the annuitant.  
[166]  
As the annuitant of a self-directed RRSP, I find that Grenon could  
have instructed CIBC Trust to dispose of the FMO units in the open market,  
subject to issues of volume and liquidity as the units were publicly traded. As a  
matter of law and contract, he had absolute authority to do so. Grenon also had  
absolute authority (subject to withholding taxes), to transfer the FMO units to  
his personal investment account or directly to the Appellants. He did not do so  
because he wanted to avoid the tax consequences associated with a withdrawal  
from the RRSP Trust. He was aware of these tax consequences.  
[167]  
Having established the income funds that Grenon (and CIBC Trust)  
believed were qualified investments for RRSP purposes (as reviewed above and  
in the TCC Decision), the RRSP Trust was instructed to subscribe for units of  
TOM and to transfer the 11 million FMO units in satisfaction of the  
subscription amount in a transaction that took place on November 14, 2005.  
The Court has already concluded that this was not an outright sale as initially  
claimed but merely an exchange or transfer-in-kind. As a result, the Court must  
conclude that at this point in time, TOM was the legal and registered owner of  
the FMO units but Grenon remained as beneficial owner because the units were  
still part of the RRSP Trust. Indeed this would be consistent with the position  
advanced in the Grenon Appeal and RRSP Trust Appeal, that income or gains  
generated by the various Income Funds and their underlying businesses were  
Page: 35  
sheltered from tax because they were qualified investments held in the RRSP  
Trust.  
[168]  
Moreover, as reviewed in the TCC Decision, when an RRSP acquires  
an investment that is not a qualified investment or becomes a non-qualified  
investment at a later point in time because it no longer meets the requirements  
of the ITA, it nonetheless remains in the RRSP and may be subject to a tax of  
1
% calculated monthly pursuant to subsection 207.1(1) of Part XI.1, until the  
non-qualified investment is removed.  
[169]  
Thus even if the Court concluded in the TCC Decision that the units  
of TOM taken in exchange for the FMO units were not a qualified investment,  
it must nonetheless conclude that the FMO units remained as part of the RRSP  
Trust. In other words, the FMO units had not been withdrawn from the RRSP  
Trust. This was clear from Grenon’s testimony and is implicitly admitted by the  
Appellants when it is argued that the Minister did not assess Grenon for the tax  
consequences “that would have followed from extracting the 11 million units  
from the” RRSP Trust (My emphasis).  
[170]  
The Court may also infer that the Minister did not assess Grenon for a  
withdrawal of the FMO units from the RRSP Trust because it was not reported  
for tax purposes. As noted by the Supreme Court of Canada in R. v. Jarvis,  
2
002 SCC 73, our tax system “relies primarily upon taxpayer self-assessment  
and self-reporting” (para. 49) such that responsibility to report the withdrawal  
fell squarely on Grenon. It is not disputed that a withdrawal of the FMO units  
from the RRSP Trust was not reported for tax purposes.  
[171]  
The Appellants nonetheless argue that TOM transferred the FMO  
units to the Appellants for the sum of $160,628,000 in exchange for demand  
promissory notes personally guaranteed by Grenon and that this involved a  
transfer of legal and beneficial ownership. I note that throughout all this,  
Grenon continued in his capacity as trustee of TOM and FMO. He also directly  
or indirectly owned or controlled the Appellants that, it is alleged, acquired  
legal and beneficial ownership of the units.  
[172]  
Since there was no evidence of an agency agreement between Grenon  
and the Appellants, the Court must look to the conduct of the parties to  
determine if an agency agreement can be implied (Avotus, supra, para 48).  
Page: 36  
[173]  
Since it was intended, as admitted by the Appellants, that the FMO  
units allegedly acquired from TOM on December 23, 2005 would be  
repurchased for cancellation on December 28, 2005 resulting in the alleged  
capital losses, I find as a fact that the Appellants had “absolutely no discretion”  
(
Prévost Car, supra, para 22) as to the disposal of those units. The only role of  
the Appellants was to hold legal title to the units for a few days. I find that those  
units were to be held on a bare trust basis only to be disposed of a few days  
later at a substantial loss. It was understood that the Appellants would not take  
any other steps. All of these transactions were pre-ordained.  
[174]  
It does not matter that the Appellants were separate legal entities since  
it is established that corporations can act as agents. They were directly or  
indirectly controlled by Grenon, the annuitant of the RRSP Trust and  
controlling trustee of TOM. The Court must conclude that the Appellants were  
mere agents or nominees for the RRSP Trust or for Grenon as principal and that  
it was never intended that they would acquire absolute ownership, including  
beneficial ownership of the FMO units.  
[175]  
On the basis of the evidence before the Court, it cannot be said that  
the Appellants enjoyed “the three key attributes of ownership, namely, risk, use  
and possession” (Smedley, supra). In Fourney, supra, Hogan J. concluded as  
follows:  
[
35] The resulting trust doctrine should apply to all the properties transferred in  
this case. All transfers of business assets and interests to the corporation were  
done gratuitously. There is no evidence to indicate an intention to gift. (…) the  
conduct of the Appellant and the corporations over the three-year period does not  
indicate an intention to transfer property to the corporation. Instead, an implied  
agent-principal relationship is indicated, with the Appellant always maintaining  
beneficial ownership of the properties and businesses.  
[176]  
The Appellants have disputed the application of Fourney, supra, in  
part because of the “exaggerated factual circumstances” and yet in this instance,  
Grenon undertook a complex series of transactions with corporate entities  
controlled by him involving assets that had not been withdrawn from the RRSP  
Trust. As a result of this, I have no difficulty in concluding that Grenon retained  
beneficial ownership of the FMO units in his capacity as the annuitant of the  
RRSP Trust whose assets included 95.5% of the units of TOM and that it, in  
turn, held the FMO units as a result of the exchange transaction noted above.  
Legal title to the FMO units may have been transferred from TOM to the  
Page: 37  
Appellants, as acknowledged by the Respondent, but beneficial ownership  
remained with the RRSP Trust.  
[177]  
I find that this conclusion is consistent with the Appellants’ admission  
as to the “uncontroverted evidence” that the accountants of TOM had reported  
that there was no change in beneficial ownership for accounting purposes. This  
was also reported for SEDI purposes. Moreover, as assumed by the Minister,  
Computershare, retained by FMO as transfer agent in the context of the FMO  
reorganization, had no record of a transfer of the FMO units, including the 8  
million units allegedly acquired by the Appellants from FULP, or of the  
repurchase of all the FMO units for cancellation on December 28, 2005.  
[178]  
If the 11 million FMO units had not been effectively withdrawn and  
continued to be held by TOM for the RRSP Trust, then the alleged transfer of  
the FVT units from FMO to TOM resulted in a circuitous transaction within the  
RRSP Trust that could not have triggered a taxable capital gain in the hands of  
FMO that could then be allocated to the Appellants. All of these transactions  
would have been inconsequential for tax purposes as they would have occurred  
within the RRSP Trust. It is fundamental to the RRSP regime that “no tax is  
payable (…) by a trust on the taxable income of the trust…” pursuant to  
subsection 146(4) and all forms of income from qualified investments accrue in  
the RRSP on a tax-exempt basis. The nature of the income, be it interest,  
dividends or capital gains, is inconsequential for tax purposes. Dispositions that  
result in capital losses are also inconsequential as they only reduce the  
monetary value of the RRSP that can be withdrawn at a later date giving rise to  
taxable income.  
[179]  
In the end, I find that the transfer of the FMO units from TOM to the  
Appellants or the transfer of the FVT units from FMO to TOM did not give rise  
to a “disposition” for the purposes of the ITA because there was no change in  
beneficial ownership of the property within the meaning of that term in  
subsection 248(1).  
[180]  
To the extent that the Appellants have reported these transactions as  
giving rise to the subject capital gains and capital losses, I find that they have  
made a misrepresentation that is attributable to neglect, carelessness or willful  
default or fraud in the filing of their returns for the 2006 taxation years. It  
cannot be aid that the Appellants’ filing position was reasonable because no  
steps had been taken to withdraw the FMO units from the RRSP Trust and thus  
beneficial ownership remained with Grenon as the annuitant thereof.  
Page: 38  
[181]  
These conclusions are sufficient for the Court to conclude that the  
subject capital gains and capital losses, as reported by the Appellants, were  
never actually realized. However, since it is admitted that the FMO units had  
not actually been withdrawn from the RRSP Trust, I find it is necessary to  
address the issue of knowledge on the part of Grenon in the context of the sham  
and window dressing arguments put forth as the Minister’s primary position.  
B. The Application of Sham or Window Dressing  
[182]  
The Minister has argued that the transactions that are alleged to have  
given rise to the subject capital gains and capital losses were a sham or window  
dressing.  
[183]  
The Appellants argue that the Minister has fundamentally  
misunderstood the law of sham as she has taken the position “that if a taxpayer  
takes tax considerations into account in its planning, it results in a sham.” The  
Appellants argue that this is not the law, relying on Cameco Corporation v. The  
Queen, 2018 TCC 195 (“Cameco”) where Owen J. concluded that “a tax  
motivation does not transform the arrangements (…) into a sham” (para. 605).  
[184]  
The Appellants assert that the Minister’s main reason for challenging  
the steps undertaken in the FMO reorganization is that it was motivated by tax  
considerations and not commercial objectives. The Appellants maintain that the  
“commercial rationale for the transactions (…) was genuine and unsurprising”  
and that the suggestion that a publicly listed entity “with thousands of  
unitholders, its own professional advisors and management, would occur  
primarily to create a capital dividend account” for the Appellants “is clearly  
implausible on its face”.  
[185] The Appellants refer to Grenon’s testimony and his explanation that  
“he realized, with his professional advisors, in the course of the transaction that  
a capital dividend account could be created, and that such a capital dividend  
account could be useful at a later time.” The Appellants reiterate that the steps  
depicting the FMO reorganization were set out in the slide deck incorporated  
into the Fresh as Amended Replies and that it was Grenon’s evidence that slides  
1
to 20 (but not slides 18 and 19) accurately depicted what actually occurred.  
[186] The Appellants argue that “a finding of sham means that what has  
been reported as a particular transaction should be set aside for the ‘real  
transaction’” but that “in the case at hand, there is no alternate reality to the  
Page: 39  
transactions that were reported.” It is argued that there is no ‘real transaction’ to  
substitute for the reported transactions, relying on Coastal Capital Savings  
Credit Union v. The Queen, 200167 FCA 181 (paras 25-26) (“Coastal”).  
[187]  
The Appellants argue that the Minister cannot apply “the doctrine of  
sham to only certain parts” of the FMO reorganization “while considering other  
parts (…) to be valid and effective”, notably the transfer of the FMO units from  
the RRSP Trust to TOM (McLarty v. The Queen, 2014 TCC 30) since otherwise  
the assessments of the RRSP Trust pursuant to Part I and Part XI.I of the ITA  
(in RRSP Trust Appeal) could not possibly be correct.  
[188] The Appellants maintain that the best evidence is that the FMO units  
acquired from FULP had value, as reflected in the transactions and that  
Grenon’s evidence “established the value of the units”. The Appellants also  
argue that the promissory notes issued in the course of the FMO reorganization  
were not “sham transactions in which the issuing party had no intention of  
paying the notes” and that “there was no evidence to support this allegation”.  
[189]  
The Appellants concede that “the assignment” by the Appellants to  
TOM “of the right to acquire FVT was not documented” but that it was  
Grenon’s evidence “that the parties to the assignment agreed to it” and that  
TOM “did in fact purchase FVT.” It is argued that “there is no evidence to the  
contrary.” The Appellants maintain moreover that there was “no self-serving  
evidence created” by the Appellants “in regard to the [FMO] reorganization to  
deceive the Minister about what the real transactions were”.  
[190]  
In Reply submissions, the Appellants reiterate that “sham” is  
determined where “parties intended to create different rights and obligations  
from those appearing from the relevant document” and this is done “intending  
to give a false impression of those rights and obligations to third parties such as  
the Minister.” It is argued that “sham” requires that parties to it “have entered  
into a false document to deceive” and that in this instance, the “Crown has  
identified no deception of the Minister in her submissions” and “has ignored the  
law with respect to sham”.  
[191]  
The Appellants argue that “intending an agreement to take effect  
according to its terms does not give rise to sham” and a taxpayer “having  
different purposes for entering into a transactions does not given rise to sham”  
and finally, “entering into a transaction only to obtain a tax benefit is not a  
sham”.  
Page: 40  
[192]  
The Appellants rely in particular on Inwest Investments Ltd. v. The  
Queen, 2015 BCSC 137 (“Inwest”) that, as explained by the Appellants,  
involved “an astute tax plan” the “goal of which was to avoid the payment of  
British Columbia [“BC”] corporate tax that would otherwise be payable on the  
sale of shares” that “had a significant accrued capital gain.”  
[193]  
In order to achieve this, the “corporation was structured not to have an  
actual business, permanent establishment, or resident director in [BC].” The  
taxpayer was eventually reassessed by the Minister, but not until after the  
expiration of the normal reassessment period, on the basis that it had a  
permanent establishment in BC during the relevant time and was therefor liable  
for taxation therein. As summarized by the Appellants, the Court concluded that  
“a statement of fact on a tax return can be a misrepresentation” that may later  
be found to be “incorrect” but if it “involves a determination of law or mixed  
fact and law” it will not be “a misrepresentation if that filing position is  
reasonable” concluding that “a difference of opinion between the CRA and the  
taxpayer is not sufficient to amount to a misrepresentation.”  
[194]  
Accordingly, the Appellants argue that in this instance, their filing  
positions “were evident on the face of their tax returns” and that “the Crown has  
failed to present any evidence to establish that these were unreasonable.”  
[195]  
The Appellants also note that the Minister has not assessed penalties  
pursuant to subsection 163(2) “being the provision penalizing the making of  
false statements or omissions in tax returns or other information provided to the  
Minister” because there is “no example of any paperwork that falsely  
documents what occurred (…) or anything done that was concealed from the  
Minister.”  
[196]  
The Appellants argue that the Minister “does not have the authority to  
second-guess business decisions legally implemented” or to “advance other  
alternatives that are more palatable to him”: Central Sprints Ltd. v. The Queen,  
2
010 TCC 543 (para 34) (“Central Sprints”) and Jolly Farmer products Inc. v.  
The Queen, 2008 TCC 409 (para 24) (“Joly Farmer”). As such, the Appellants  
dispute the Respondent’s “proposed alternative transactions” or the suggestion  
that the FMO reorganization could have been achieved in fewer steps without  
the involvement of the Appellants. I find that it is not necessary to review all  
the submissions made on these proposed alternative steps and will only  
highlight the submissions made on the subject capital gains and the effect of the  
capital losses on the calculation of the capital dividend account.  
Page: 41  
[197]  
It is argued that the Respondent cannot rely on Triad Gestco Ltd. v.  
The Queen, 2001 TCC 259 (“Triad Gestco”) because it is “a world away from  
the way the Tax Act provisions work with respect to mutual fund trusts and  
their unitholders”. The Appellants explain that “[i]n the present case, the  
Corporate Appellants acquired units of a mutual fund trust, [FMO], at a high  
value and therefore had a high cost base. Inside [FMO] was an asset with a  
“pregnant” capital gain, being the units of FVT. When [FMO] disposed of FVT,  
realized the capital gain and distributed it, the tax result was exactly as  
contemplated and intended in the Tax Act”.  
[198]  
On the issue of the capital losses resulting from the repurchase of the  
FMO units for cancellation, it is argued that “whether or not a capital loss is  
realized has nothing to do with the existence of a capital gain, half of which was  
credited to the capital dividend account” of the Appellants. It is argued that the  
capital gain would have been added to the respective capital dividend accounts  
of the Appellants pursuant to paragraph (f) of the definition of “capital dividend  
account” in subsection 89(1) but that the “capital loss does not offset the credit  
to the capital dividend account” as this was the law throughout the material  
period.  
Position of the Respondent  
[199]  
The Respondent argues that there will be a finding of sham “where the  
actual legal rights and obligations” arising from a transaction or a series of  
transactions “differ from those purportedly established in the documentation  
entered into by the parties to the transaction”. In such instances, it is argued that  
the “Canadian Courts have applied the common law sham doctrine to  
recharacterize the legal consequences”: Shell Canada v. Her Majesty the  
Queen, 99 DTC 5669 (para 39) (“Shell Canada”). The Respondent also relies  
on the concept of sham as explained in Cameco, supra.  
[200]  
The Respondent takes the position that the Appellants, Grenon, the  
RRSP Trust and TOM as well as FMO collectively entered into a series of  
transactions comprising the FMO reorganization and by so doing, “knowingly  
misrepresented to the Minister the true nature of the transactions”.  
[201]  
The Respondent argues that it was represented to the Minister that the  
FMO reorganization was undertaken “exclusively for business purposes” as  
described in the “objectives” summarized above, but what was actually  
undertaken “was a series of pre-ordained transactions designed by Grenon, for  
Page: 42  
his benefit” being “the purported creation of CDAs in respect” of the  
Appellants “whereby capital dividends in the aggregate amount of $110 million  
were paid to their parent corporation and in turn to Grenon tax-free.” According  
to the Respondent “this was accomplished through a series of complex  
transactional steps (…) that were designed to use approximately 19 million  
issued and outstanding FMO units to artificially create capital gains and capital  
losses.”  
[202]  
The Respondent argues that “Grenon was the driving force behind the  
FMO Reorganization” and that neither of the other two trustees were  
knowledgeable “with the transactional steps set out in the Reorganization  
Agreement or the Amended Reorganization Agreement.”  
[
203] The Respondent argues that the various steps undertaken in the FMO  
reorganization could have been undertaken in as little as five steps and not 16 or  
7 steps as contemplated in the agreements noted above. It is argued that the  
objectives” of the reorganization as described above, were mere window  
dressing “designed to give the illusion to the Minister of the business objectives  
…) which could have been accomplished in the ordinary course without the  
1
“
(
FMO Reorganization” and that “the Appellants have misrepresented the steps to  
attain the stated business objectives when in reality they were undertaken solely  
to accomplish Grenon’s CDA Tax Plan” which was the creation of the capital  
dividend account balance with the Appellants.  
[204]  
The Respondent adds that the FMO unitholders were led to believe  
they could choose either Option 1 or Option 2 but in reality most units were  
already held in an exempt plan such that there was no real choice and no  
evidence was led as to any unitholders who held units outside of an exempt  
plan. It is argued that Option 2 was designed solely to achieve “Grenon’s CDA  
Tax Plan” and that, while the public unitholders were told they “would be  
treated equitably”, the transactions that gave rise to subject capital gains, the  
allocation thereof to the Appellants and the payment of the capital dividends to  
Grenon, were not disclosed to them. Nor were the public unitholders informed  
that the Appellants would participate in the Second Stage Disposition and be  
entitled to “all of the income” from FVT, an amount that was ultimately  
assigned to TOM and paid to the RRSP Trust.  
[205]  
It is argued that “the claimed capital gains and the capital dividends  
elections were shams and misrepresentations.” The Respondent maintains that  
the Appellants “were interposed as the sole elector of Option 2 in order for  
Page: 43  
Grenon to realize the benefits of the CDA Tax Plan (…) by the artificial  
creation of a capital gain and an offsetting paper capital loss as well as the  
manufacture of a $116 million increase to the CDAs.” The Respondent  
advances a number of other arguments (that are disputed by the Appellants)  
including that the units of FVT were not capital property since they were  
intended for immediate resale to TOM and were “a necessary and pre-ordained  
step to trigger the capital gain in order to implement the CDA Tax Plan”.  
[206]  
The Respondent relies in particular on Farragi, supra, where the Tax  
Court found that the taxpayers had merely manufactured capital gains to  
increase the capital dividend accounts leading to the payment of tax-free capital  
dividends. As noted by the Respondent, the Federal Court of Appeal (2008  
FCA 398, paras 72-73) confirmed the trial decision, finding that “the  
transactions giving rise to the purported capital gains and the capital dividend  
elections were both misrepresentations and shams.” As explained by the  
Respondent, the Court found that “the shares were not capital property because  
they were acquired for immediate resale with no intention that they be held for  
long-term appreciation” and that “property that is pre-ordained as part of a tax  
plan to be resold immediately after acquisition is not in the nature of capital  
property but rather had the character of inventory or an adventure in the nature  
of trade held on income account” and finally that “the tax treatment of the  
property disposed of whether on capital or income account is determined by its  
nature in the hands of the person who disposes of the property.”  
[207]  
The Respondent also relies on Triad Gestco Ltd. v. The Queen, 2012  
FCA 258 (“Triad Gestco”) where the Court stated that the “capital gains system  
is aimed at taxing increases in ‘economic power’ and (…) is generally  
understood to apply to real gains and real losses.” The Court also quoted a UK  
House of Lords decision where it was stated that “[t]he capital gains tax was  
created to operate in the real world, not that of make-believe… it is a tax on  
gains (or, I might have added, gains less losses), it is not a tax on arithmetical  
differences” (paras. 41 and 42).  
[208]  
In that context, the Respondent asserts that Grenon knew that after the  
reorganization, the FMO units would be worthless and would have no material  
value. It is argued that Grenon has admitted that the only reason for the transfer  
of the FMO units from TOM to the Appellants was to generate the capital gains  
and off-setting capital losses. It is argued that the Appellants did not enjoy a  
“real” economic gain nor a real economic loss.  
Page: 44  
[209]  
The Respondent argues that unlike Triad Gestco, supra, “where the  
paper capital losses were created to offset real capital gains, in this case, the  
artificial capital losses were created to offset equally artificial capital gains.”  
Analysis and Conclusion  
[
210]  
this Court to second-guess business decisions or to allow the Minister to  
advance other alternatives that are more palatable to him”: Central Sprints and  
Joly Farmer, supra.  
On the one hand, I agree with the Appellants that it is not the role of  
“
[211]  
I also find that it is not the role of this Court, in the context of these  
appeals, to determine whether the various steps in the FMO reorganization were  
successful and achieved the “business objectives”, as noted above, including the  
creation of a new mutual fund trust with a simplified structure, an increase of  
the cost base of the units and their trading liquidity. Those issues are not  
directly before the Court.  
[212]  
The Respondent claims that the public unitholders of FMO were  
misled as to the so-called true objectives of the reorganization and that it was a  
mere facade or “window dressing” for what has been described as “Grenon’s  
CDA Tax Plan”. I find that it is not necessary to determine whether the public  
unitholders were misled or whether the FMO reorganization was fair and  
“equitable” to them, though the Court may wonder if they truly understood that  
income of approximately $137 million (compromised of a gain of $105 million  
from the bump-up of assets and other net business income) would be paid by  
FVT to TOM and then distributed pro rata to its unitholders including the RRSP  
Trust. In other words, the Court may rightfully wonder whether the public  
unitholders who owned 42% of the FMO units truly understood that 100% of  
the income would be paid to TOM and that 95.5% of that amount would then be  
allocated to the RRSP Trust of which Grenon was the sole annuitant. It may be  
that the public unitholders were prepared to accept this as long as the cost base  
of their units was actually increased with little or no tax consequences. This was  
promoted as a benefit and quite possibly was accepted as such. As far as the  
public unitholders were concerned, the FMO units would be exchanged on a  
one-for-one basis for new units of FIF, there would be no change to existing  
management or the underlying business operations and the new units would  
continue to trade on the Toronto Stock Exchange under the same ticker symbol.  
Page: 45  
[213]  
The Appellants have gone to great lengths to convince the Court that  
the FMO reorganization was genuine, that the business objectives were  
legitimate and that the involvement of the corporate Appellants was only  
envisaged at a late stage because of the potential to create the capital dividend  
accounts. Grenon was examined and cross-examined as to the so-called ‘real’  
purpose of the FMO reorganization. I find that it is not necessary to reach a  
conclusion, in a chicken-and-egg fashion, as to which came first. Grenon has  
admitted that it occurred to him prior to the issuance of the Information Circular  
that the underlying gain could be eligible for capital dividend treatment in the  
hands of a corporate unitholder who would elect Option 2. Whether Grenon  
conceived of this in medias res, or in the midst of things, as has been suggested,  
or whether the so-called “CDA Tax Plan” was envisaged and planned a long  
time before the actual reorganization is not relevant to these appeals.  
[214]  
The Court finds that the transfer of the FMO units from the RRSP  
Trust to TOM was undertaken for the sole purpose of implementing the series  
of transactions that would lead to the creation of the subject capital gains and  
capital losses and the payment of the alleged capital dividends. As described in  
the TCC Decision, the acquisition by the RRSP Trust of units in all the other  
Income Funds was for the purpose of pursuing business endeavours that would  
be managed directly or indirectly by Grenon and 99% or so of the profits would  
flow back to the RRSP Trust on a tax-exempt basis. Since 58% of the income  
from FMO was already being generated on a tax-exempt basis in the RRSP  
Trust, the Court must conclude that Grenon took steps to transfer the FMO units  
from the RRSP Trust to TOM for the sole purpose of implementing the  
secondary or ad hoc objective of pursing the “CDA Tax Plan”.  
[215]  
Grenon has admitted that the FMO units had not been withdrawn from  
the RRSP Trust even after they had been transferred to TOM. This is consistent  
with his position that the acquisition of units in the various Income Funds did  
not trigger tax consequences because they were all qualified investments. As a  
result, Grenon did not report the transfer of the FMO units from the RRSP Trust  
to TOM as a withdrawal in his personal income tax return for the 2005 taxation  
year. Had he done so, the income inclusion would have been equal to the fair  
market value of the units on November 14, 2005, being the sum of  
$
152,874,000 or alternatively, the sum of $160,628,000, being the fair market  
value of the FMO units when they were allegedly transferred to the Appellants  
on December 23, 2005.  
Page: 46  
[216]  
The Minister has assumed that the carrying value of the FMO units  
was approximately $34,663,758 on November 14, 2005 and approximately  
35,547,407 on December 23, 2005. This suggests that the FMO units had an  
accrued gain of approximately $125,080,593 on December 23, 2005  
$
($160,628,000 - $35,547,407 = $125,080,593).  
[217] The carrying value (a term equivalent in accounting terminology to  
‘book value’) of the FMO units, was confirmed in the audited financial  
statements of TOM prepared by Grant Thornton for the 2005 taxation year. The  
Appellants have not challenged these figures or addressed this issue.  
[218]  
In fact, Grenon admitted in his testimony that he realized that a capital  
gain could be triggered if FMO disposed of the FVT units. In the context of  
these appeals, the Appellants have argued that “inside” FMO “was an asset with  
a ‘pregnant’ capital gain, being the units of FVT” and when FMO “disposed of  
FVT” it “realized the capital gain and distributed it.”  
[219]  
This confirms that the sole purpose of the transactions involving the  
transfer of the FMO units from the RRSP Trust to TOM on November 14, 2005  
and from TOM to the Appellants on December 23, 2005, was to extract the gain  
of $125,080,593 that had accrued in the RRSP Trust.  
[220] As argued by the Appellants, quoting from Cameco, supra (para 605)  
“a tax motivation does not transform the arrangements (…) into a sham”.  
However, in this instance Grenon was motivated by a desire to “extract” a gain  
that had accrued in the RRSP Trust. I find that the various transactions  
involving the Appellants were undertaken to create an illusion that this had  
occurred despite the admission that the FMO units had not been withdrawn  
from the RRSP Trust.  
[221] In the TCC Decision, I reviewed the notions of sham (paras 364 to  
3
73) and window dressing (paras 390 to 393). In the context of these appeals, I  
repeat and rely on that analysis and find that the transactions that purported to  
transfer the FMO units from TOM to the Appellants were a sham (or mere  
window dressing) and that it involved an element of deceit in that Grenon, and  
by extension the Appellants controlled by him, entered into these transactions to  
give the appearance to the outside world that they had acquired certain rights  
and obligations in connection with the FMO units which were different from  
what he or they knew them to be. The element of deceit is apparent from the  
admission that Grenon, and by extension the Appellants, knew or must be taken  
Page: 47  
to have known that the FMO units had not been withdrawn and that TOM  
continued to hold beneficial ownership of those units for the benefit of the  
RRSP Trust and ultimately for the benefit of Grenon, as the annuitant thereof.  
[222]  
If the transfer of the FMO units from TOM to the Appellants was a  
sham and a misrepresentation, then it follows that the transaction by which  
FMO purported to accept an assignment from the Appellants of the right to  
dispose of the FVT units was also a sham and a misrepresentation because the  
Appellants had not actually acquired beneficial ownership of the FMO units.  
[223]  
Moreover the transaction by which FMO purported to transfer FVT to  
TOM, thus triggering the alleged capital gain, was also a sham and a  
misrepresentation because the units of FMO continued to be held in the RRSP  
Trust. This was a circuitous transaction within the RRSP Trust. It cannot be said  
that this transaction triggered ‘real’ capital gains. Similarly, it cannot be said  
that the alleged transaction by which FMO repurchased its units for cancellation  
resulted in ‘real’ capital losses. These were mere paper transactions as  
described in Farragi, supra, allegedly supported by demand promissory notes  
that the Appellants would never be called upon to honour and that were issued  
and cancelled on December 28, 2005.  
[224] I agree with the Respondent, relying on Triad Gestco, supra, “that the  
Appellants did not enjoy a ‘real’ economic gain nor a real economic loss”.  
[225]  
As noted at paragraph 382 of the TCC Decision, “[t]he notion of sham  
requires that there be “a façade of reality quite different from the disguised  
reality” or “a transaction conducted with an element of deceit so as to create an  
illusion” relying on Stubart Investments Ltd. v. the Queen, [1984] 1 SCR 536  
(
“Stubart”).  
[226] In this instance, I am satisfied that Grenon, and by extension the  
Appellants, knew at all times that the FMO units had not been withdrawn from  
the RRSP Trust. The transfer of those units to TOM was undertaken to create an  
illusion that they had been withdrawn from the RRSP when in reality they had  
not. The position adopted by Grenon was duplicitous and misleading. As a  
result, I find that the transactions that followed and that purported to trigger the  
subject capital gains and offsetting capital losses were undertaken “with an  
element of deceit so as to create an illusion”. Those transactions were a sham  
and a misrepresentation and should be should be disregarded.  
Page: 48  
[227]  
Since the Court has concluded that the transactions giving rise to the  
subject capital gains and capital losses were a sham and a misrepresentation, it  
follows that FMO could not allocate the capital gains of $226,258,087 to the  
Appellants leading to the additions to their respective capital dividend accounts.  
VIII. CALCULATION OF THE CAPITAL DIVIDEND ACCOUNT (“CDA”)  
[228]  
Since the Court has concluded that the series of transactions did not  
result in the subject capital gains, it follows that there would be no addition to  
the capital dividend accounts. However, the Appellants have argued that if the  
Minister was correct in concluding that the repurchase of the FMO units for  
cancelation did not give rise to a capital loss, that would not change the  
calculation of the capital dividend account since the loss would not have the  
effect of reducing the capital gain that was allocated by FMO to the Appellants.  
This conclusion should be addressed.  
[229] In Gladwin Realty Corporation v. The Queen, 2019 TCC 62  
(
“Gladwin”), the taxpayer had realized a taxable capital gain from the sale of a  
commercial real estate property and sought “to distribute the full amount to  
shareholders] as a tax-free capital dividend of the capital gain realized” (para  
). Through a series of transactions, the amount of the capital gain was  
[
3
essentially doubled so that the actual amount of the taxable capital gain was  
added to the capital dividend account and paid out to shareholders.  
[230]  
Hogan J. dismissed the appeal relying on GAAR. I note that the  
transactions at issue in Gladwin occurred in 2008 and that the applicable CDA  
regime was the same for the taxation years at issue in this appeal. In any event,  
the trial decision was affirmed by the Federal Court of Appeal (2020 FCA 142)  
and Noel C.J. indicated that:  
[
56] A CDA is a notional account maintained by private corporations to keep  
track of certain types of tax-free surpluses accumulated over time (Reasons,  
para. 39). As per the definition found at subsection 89(1), the balance of the  
CDA is determined at any particular time by adding, inter alia, (i) the tax-free  
portion of capital gains, (ii) the amount of tax-free capital dividends received by  
the corporation from other corporations and (iii) the proceeds of certain life  
insurance policies and subtracting, inter alia, (iv) the non-deductible portion  
of capital losses and (v) capital dividend distributions made before the  
particular time (Reasons, para. 39).  
[
My emphasis]  
Page: 49  
[231]  
Paragraph 56 above suggests that the “the balance of the CDA (…) at  
any particular time” is determined by adding the “tax-free surpluses  
accumulated over time (...) and subtracting (…) the non-deductible portion of  
capital losses and” any “capital dividend distribution made before the particular  
time”. This confirms paragraph 39 of the trial decision. I find that this is  
consistent with the use of the words “the total of” appearing at the  
commencement of the definition, followed by the items or components defined  
in paragraphs (a) to (g).  
[232]  
In this instance, the subject capital gains and capital losses are alleged  
to have been realized on December 28, 2005. Based on a textual, contextual and  
purposive analysis of the definition of a CDA as explained above, I find that  
there is no reason to conclude that the non-taxable portion of the capital gains  
purportedly allocated by FMO to the Appellants (pursuant to paragraph (f) of  
the definition) would not be reduced by the non-taxable portion of the capital  
losses realized in transactions that took place within minutes of each other on  
the same day. The capital dividends at issue were declared in the months that  
followed when the CDA balance was nil such the dividends declared could not  
be characterized as capital dividends.  
[233]  
As noted by the Respondent, a corporation that has been assessed  
pursuant to subsection 184(2) because it has declared excess dividends may  
elect, within 90 days from the receipt of the notice of assessment, pursuant to  
subsection 184(3) to have the non-qualifying portion of the dividend treated as  
a separate taxable dividend payable by the shareholders, thus avoiding Part III  
tax of 60%.  
[
(
234] However, as explained by the Federal Court of Appeal in Farragi  
2008 FCA 398), confirming the comments made by the trial judge, the election  
is intended to allow corporations “to correct their mistake and avoid the special  
tax provided under Part III” but it is not intended that the provision will apply  
where “the initial CDA was sham (sic), and those claiming the benefit of Part  
III are the authors of the sham” (para 82).  
[235]  
In this instance, it is admitted that the Appellants were owned or  
controlled by Grenon and the Court has concluded that they were his agents or  
nominees. The Court must conclude that they were willing participants in the  
scheme to artificially manufacture the subject capital gains and capital losses  
that were reported in their T2 tax returns for the 2006 taxation year. I see no  
reason to distinguish between Grenon and the Appellants as “the authors of the  
Page: 50  
sham” giving rise to the excess capital dividends and Part III Reassessments at  
issue in these appeals.  
[236]  
As a result of the above and the Court’s finding that the additions to  
the capital dividend accounts were a sham and a misrepresentation, it follows  
that the Appellants are not entitled to rely on the elections filed pursuant to  
subsection 184(3) to treat the excess dividends as ordinary taxable dividends.  
Page: 51  
IX. GENERALANTI-AVOIDANCE RULE (“GAAR”)  
[237]  
As noted in the TCC Decision, GAAR is an argument of last resort  
that assumes that a taxpayer has otherwise complied with the provisions of the  
ITA.  
[
238]  
the Supreme Court of Canada in Canada Trustco Mortgage Co. v. Canada,  
005 SCC 54 (“Canada Trustco”) and the basic principles were reviewed at  
The application of GAAR was explained in the seminal decision of  
2
paragraphs 531 to 541 of the TCC Decision. It is not necessary to do so again.  
A. GAAR in Connection with the RRSP Trust  
[239]  
The first issue is whether there was a tax benefit? It is not disputed  
that the purpose of the transactions involving the Appellants was to extract the  
so-called ‘pregnant’ gain of $125,080,593 that had accrued in the RRSP Trust.  
Steps were taken to ensure that this gain would be realized and then allocated  
by FMO to the Appellants who allegedly held 100% of the units, leading to the  
alleged additions to their respective capital dividend accounts. Since the FMO  
units, having a fair market value of $160,628,000, had not actually been  
withdrawn from the RRSP Trust and reported by Grenon as taxable income, I  
conclude that this was a tax benefit resulting from a transaction or series of  
transactions as defined in subsection 245(1).  
[240]  
The second issue to be addressed is whether there was an avoidance  
transaction in the sense that it cannot reasonably be said that the transaction(s)  
was undertaken or arranged primarily for bona fide purposes other than to  
obtain a tax benefit. As described in more detail above, Grenon undertook  
various steps commencing with the transfer of the FMO units from the RRSP  
Trust to TOM, but without actually effecting a withdrawal. He then took steps  
to transfer the FMO units from TOM to the Appellants in order to implement a  
series of transactions that would allegedly trigger the subject capital gains and  
capital losses. As argued by the Respondent, this was arranged to avoid Part I  
tax arising from a withdrawal. I find these were avoidance transactions as  
defined in subsection 245(3).  
[241]  
The third issue is whether the avoidance transaction(s) “may  
reasonably be considered” to result directly or indirectly in an abuse of the ITA  
having regard to the “object, spirit and purpose” of the provisions as set out in  
subsection 245(4). The Court must ask whether the transaction or series of  
Page: 52  
transactions were abusive in that they defeated “the underlying rational of the  
provisions that are relied upon (…) in a manner that frustrates or defeats the  
object, spirit or purpose of those provisions”: Canada Trustco, supra (para. 45).  
[242]  
As reviewed in the TCC Decision, subsection 146(4) provides that  
“no tax is payable (…) on the taxable income in the trust (…) that was governed  
by a registered retirement income plan,” subject to certain limitations.  
Subsection 146(8) provides that withdrawals from an RRSP “shall be included  
in computing a taxpayer’s income for a taxation year.” As I explained in Roy v.  
The Queen, 2019 TCC 50 “Section 3 of the Act and more specifically paragraph  
5
6(1)(h) and subsection 146(8), provide that RRSP “withdrawals” are to be  
included in income (Andaluz v. The Queen, 2015 TCC 165)” (para 16).  
[243]  
In find that the object, spirit and purpose of these provisions is to  
ensure, in the context of the RRSP regime as a whole, that all forms of income  
or gains, described as “taxable income in the trust” accrue on a tax-exempt  
basis but that the full value of all withdrawals from an RRSP are included in a  
taxpayer’s taxable income.  
[244]  
Grenon took steps to ‘move’ the FMO units from the RRSP Trust to  
TOM and then to the Appellants, but without reporting the fair market value  
thereof as a withdrawal. Secondly, the purpose of the transactions, as admitted  
by him, was to extract the gain that had accrued within the RRSP.  
[245]  
I find that these steps were abusive of the RRSP regime since  
Parliament has intended that all forms or income or gains generated by qualified  
investments held in the RRSP are not subject to tax. In other words, the  
disposition of a qualified investment within an RRSP is inconsequential for tax  
purposes, whether it results in gains or losses. But in this instance, Grenon  
implemented a series of transactions to extract the accrued gain (without  
actually taking steps to remove the FMO units from the RRSP Trust) and to  
transfer that accrued gain to the Appellants to create the capital dividend  
accounts leading to payment of the capital dividends.  
[
246]  
defeat “the underlying rational” of the provisions as provided for in subsection  
45(4).  
I find that these transactions were abusive and that they sought to  
2
B. GAAR in Connection with the Capital Dividend Accounts  
“CDA”)  
(
Page: 53  
[247]  
For the purpose of this analysis, it will be assumed that legal and  
beneficial ownership of the FMO units had been transferred to the Appellants  
who had selected Option 2 in the FMO reorganization thus acquiring the right  
to dispose of the units of FVT in the Second Stage Disposition, that this right  
was assigned to FMO who then disposed of the units to TOM, thus triggering  
the capital gain of $226,258,087 and that the FMO units were then repurchased  
for cancellation from the Appellants creating a capital loss of $224,761,348. It  
will be assumed that the capital gain realized by FMO was allocated to the  
Appellants who credited one-half of that amount to their capital dividend  
accounts and that capital dividends of $110,000,000 were then declared, as  
described above.  
[248]  
The first issue is whether there was a tax benefit. To the extent that  
the Appellants were able to record capital gains and off-setting capital losses in  
more or less equal amounts, as a result of transactions that occurred within  
minutes of each other on the same day and then purported to make additions to  
their capital dividend accounts and declared tax-free capital dividends of about  
$
110,000,000, I have no difficulty in concluding that this was a tax benefit.  
[249] The next issue is whether there was an avoidance transaction. The  
capital gains regime (section 38) contemplates that 50% of capital gains are  
taxable and the remaining balance is non taxable. If a capital loss is also  
realized, 50% of that amount will reduce the taxable capital gain such that if a  
taxpayer realizes a capital gain of $100,000 and a capital loss of $100,000, the  
taxable capital gain is reduced to nil. The CDA regime seeks to replicate this for  
capital gains earned by a corporation by providing that 50% of gains are taxable  
and the non-table portion is credited to the CDA (as explained by Noel C. J. in  
Gladwin, supra, para 56) and can be paid out to shareholders on a tax-free  
basis. This is an attempt to give “effect to the principle of integration”  
(
Gladwin, supra, para. 59). As further explained by Noel C.J.:  
[
58] When a private corporation has a positive CDA balance, it may  
distribute those surpluses, tax-free, by way of a capital dividend, but only to  
the extent of the corporation’s CDA balance immediately before the dividend  
becomes payable (…)  
(…)  
[
61] The same rationale governs the tax treatment of capital losses. For that  
purpose, when a corporation suffers a capital loss, a portion of the loss that  
corresponds with the non-taxable capital gain portion is deducted from the  
CDA, thereby lowering the amount available for capital dividend election  
Page: 54  
and distribution. This again mimics the effect of a capital loss when incurred by  
an individual taxpayer directly. The CDA computation mechanism reflects this  
by decreasing the amount that can be paid out tax-free by a corresponding  
amount whenever a private corporation suffers a capital loss.  
[
My emphasis]  
[250]  
The Appellants have argued that the capital gains were “allocated” to  
them by FMO and 50% of the amount was credited to their respective CDA  
pursuant to paragraph (f) of the definition of “capital dividend account” as set  
out in subsection 89(1). It was argued that 50% of the capital loss resulting from  
the repurchase of the FMO units was credited to their respective CDA account  
pursuant to paragraph (a) of the definition but did not reduce the CDA balance.  
[251]  
To the extent that this is so, I would view this as an avoidance  
transaction because if the two amounts were realized on the same day, before  
the capital dividends had been declared, then the balance of the CDA would  
have been nil, there being only ‘one’ CDA balance under the ITA. To the extent  
that the Appellants had structured the transaction to achieve this result, I have  
no difficulty in concluding that it was an ‘avoidance transaction’ as defined in  
subsection 245(3) and that it cannot be said that the steps were undertaken or  
arranged for bona fide purposes other than to obtain a tax benefit.  
[
252]  
the ITA. As noted above, the question is whether the avoidance transaction(s)  
may reasonably be considered” to result directly or indirectly in an abuse of  
The third issue is whether the transactions abused the provisions of  
“
the ITA having regard to the “object, spirit and purpose” of the provisions as set  
out in subsection 245(4): Canada Trustco, supra (para. 45).  
[253] The analysis of this issue relates in part to the capital gains regime as  
described above. As explained by Noel. C.J. (Gladwin, supra):  
[
60] In broad terms, the CDA regime seeks to achieve this result by neutralizing  
the impact of the interposition of a corporation in the manner in which capital  
gains are taxed. Given that only one half of capital gains is taxable (section 38),  
Parliament provided for a mechanism whereby a corporation can preserve the tax-  
free portion of the gain for distribution to a shareholder without attracting an extra  
level of tax—this mechanism governs the manner in which the CDA is computed.  
In essence, the CDA regime ensures that no more than the tax-free portion is  
distributed to shareholders by way of a capital dividend so as to mirror the  
tax treatment of an individual taxpayer who generates the underlying gain  
directly.  
Page: 55  
[
My emphasis]  
[254]  
If a corporation realizes a capital gain of $100,000 from the sale of  
property A and a capital loss of $100,000 from the sale of property B on the  
same day, the balance of the CDA calculated pursuant to paragraph (a) of the  
definition would be nil. If the CDA regime is “to mirror the tax treatment of an  
individual taxpayer who generates gains directly” there would be no reason in  
principle to treat amounts received from a trust pursuant to paragraph (f) of the  
definition, any differently.  
[
255] The intent of Parliament was to ensure that the positive components of  
the CDA would be ‘added’ and that the negative amounts would be  
subtracted’. The payment of a capital dividend by a corporation that has  
‘
realized capital gains and capital losses in an equal amount, more or less, on the  
same day and before the capital dividends are declared, would defeat the  
“
underlying rational of the provisions (…) in a manner that frustrates or defeats  
the object, spirit or purpose of those provisions”: Canada Trustco, supra (para.  
5). It can be said that the “object, spirit and purpose” of the CDA regime is to  
4
ensure that it mirrors the tax treatment of capital gains for an individual and that  
the Minister can only seek to tax gains that give rise to ‘real’ economic gains.  
By the same token, only one half of the ‘real’ economic gains realized by a  
corporation can be added to the CDA.  
[
256]  
defeat “the underlying rational” of the provisions as provided for in subsection  
45(4).  
I conclude these transactions were abusive as they were intended to  
2
C. The Reasonable Tax Consequences  
[257]  
The Court thus concludes that the steps undertaken by the Appellants  
in connection with RRSP Trust and in connection with the CDA, as described  
above, 1) achieved an outcome the statutory provisions were intended to  
prevent, 2) defeated the underlying rational of the provisions and 3)  
circumvented the provisions in a manner that frustrated or defeated its object,  
spirit and purpose: Copthorne Holdings Ltd. v. Canada, 2011 SCC 63 (para 72).  
[258]  
The final issue is the determination of the tax consequences “as is  
reasonable in the circumstances” pursuant to subsection 245(5). As described  
above, Grenon took steps to extract the accrued gain without actually  
withdrawing the FMO units from the RRSP Trust and reporting taxable income  
under Part I of the ITA equal to the fair market value of the units. He then  
Page: 56  
attempted to transfer the accrued gain to the Appellants by entering into a series  
of transactions that purportedly crystalized the accrued gain resulting in the  
subject capital gains with offsetting capital losses to ensure that the Appellants,  
being his agents and nominees, would not be subject to tax. The final step  
involved the declaration and payment of the capital dividends by the  
Appellants, as detailed above, in the approximate amount of $110,000,000 that  
were eventually paid out to Grenon on a tax-free basis.  
[259]  
Since the Court has concluded that the various steps as described  
above, were avoidance transactions as defined in subsection 245, the Court  
must conclude that the reasonable tax consequences would be to deny the  
subject capital gains and capital losses and to confirm the Part III  
Reassessments.  
X. CONCLUSION  
[260]  
The appeals are dismissed with costs to Respondent.  
[261]  
The Parties shall have 60 days from the date hereof to provide written  
submissions regarding costs. Such submissions shall not exceed 15 pages per  
party.  
[262]  
On consent of the parties, following the issuance of the TCC  
Decision, the parties shall include submissions on costs in the Grenon Appeal  
and RRSP Trust Appeal.  
These Amended Reasons for Judgment are issued in substitution of the  
Reasons for Judgment dated June 24, 2021 in order to correct the words  
underscored in paragraph 113 hereof.  
Signed at Ottawa, Canada this 24th day of June 2021.  
Signed at Ottawa, Canada this 1st day of April 2022.  
Page: 57  
“Guy R. Smith”  
Smith J.  
ANNEX A  
Income Tax Act  
Loi de l’impôt sur le revenu  
R.S.C., 1985, c. 1 (5th Supp.)  
Version of document from 2006-07-01 to  
L.R.C. (1985), ch. 1 (5e suppl.)  
Version du document du 2006-07-01 au  
2006-12-31:  
2
006-12-31:  
Computation of Income  
Basic Rules  
Calcul du revenu  
Règles fondamentales  
Income for taxation year  
Revenu pour l’année d’imposition  
3
The income of a taxpayer for a taxation  
3
Pour déterminer le revenu d’un  
year for the purposes of this Part is the  
taxpayer’s income for the year determined  
by the following rules:  
contribuable pour une année d’imposition,  
pour l’application de la présente partie, les  
calculs suivants sont à effectuer :  
(a) determine the total of all amounts each  
a) le calcul du total des sommes qui  
of which is the taxpayer’s income for the  
year (other than a taxable capital gain from  
the disposition of a property) from a source  
inside or outside Canada, including, without  
restricting the generality of the foregoing,  
the taxpayer’s income for the year from  
each office, employment, business and  
property,  
constituent  
chacune  
le  
revenu  
du  
contribuable pour l’année (autre qu’un gain  
en capital imposable résultant de la  
disposition d’un bien) dont la source se situe  
au Canada ou à l’étranger, y compris, sans  
que soit limitée la portée générale de ce qui  
précède, le revenu tiré de chaque charge,  
emploi, entreprise et bien;  
(
(
(
b) determine the amount, if any, by which  
b) le calcul de l’excédent éventuel du  
montant visé au sous-alinéa (i) sur le montant  
visé au sous-alinéa (ii):  
i) the total of  
A) all of the taxpayer’s taxable capital  
(i) le total des montants suivants :  
gains for the year from dispositions of  
property other than listed personal property,  
and  
(A) ses gains en capital imposables pour  
l’année tirés de la disposition de biens, autres  
que des biens meubles déterminés,  
(B) the taxpayer’s taxable net gain for the  
year from dispositions of listed personal  
property,  
(B) son gain net imposable pour l’année tiré  
de la disposition de biens meubles  
déterminés,  
exceeds  
(ii) l’excédent éventuel de ses pertes en  
(ii) the amount, if any, by which the  
capital déductibles pour l’année, résultant de  
Page: 2  
taxpayer’s allowable capital losses for the  
la disposition de biens autres que des biens  
meubles déterminés sur les pertes déductibles  
au titre d’un placement d’entreprise pour  
l’année, subies par le contribuable;  
year from dispositions of property other  
than listed personal property exceed the  
taxpayer’s allowable business investment  
losses for the year,  
(
…)  
Registered retirement savings plan, etc.  
6(1)(h) amounts required by section 146  
Régime enregistré d’épargne-retraite, etc.  
5
6(1)(h) toutes sommes relatives à un régime  
5
enregistré d’épargne-retraite ou à un fonds  
enregistré de revenu de retraite et qui  
doivent, en vertu de l’article 146, être  
incluses dans le calcul du revenu du  
contribuable pour l’année;  
in respect of a registered retirement savings  
plan or a registered retirement income fund  
to be included in computing the taxpayer’s  
income for the year;  
(…)  
Dividende en capital  
Capital dividend  
83(2) Lorsque, à un moment donné après  
1
971, un dividende devient payable par une  
8
1
3(2) Where at any particular time after  
971 a dividend becomes payable by a  
société privée aux actionnaires d’une  
catégorie quelconque d’actions de son  
capital-actions et que la société fait un choix  
relativement au montant total du dividende,  
selon les modalités et le formulaire  
réglementaires, au plus tard au premier en  
date du moment donné et du premier jour où  
une partie du dividende a été payée, les  
règles suivantes s’appliquent :  
private corporation to shareholders of any  
class of shares of its capital stock and the  
corporation so elects in respect of the full  
amount of the dividend, in prescribed  
manner and prescribed form and at or  
before the particular time or the first day on  
which any part of the dividend was paid if  
that day is earlier than the particular time,  
the following rules apply:  
a) le dividende est réputé être un dividende  
en capital jusqu’à concurrence du montant du  
compte de dividendes en capital de la société  
immédiatement avant le moment donné;  
(a) the dividend shall be deemed to be a  
capital dividend to the extent of the  
corporation’s capital dividend account  
immediately before the particular time; and  
b) aucune partie du dividende n’est incluse  
dans le calcul du revenu des actionnaires de  
la société.  
(b) no part of the dividend shall be included  
in computing the income of any shareholder  
of the corporation.  
(
…)  
Capital Divident Account  
9(1) capital dividend account of a  
Compte de dividends en capital  
89(1) compte de dividendes en capital  
s’agissant du compte de dividendes en capital  
8
d’une société,  
à
un moment donné,  
Page: 3  
corporation at any particular time means the  
amount, if any, by which the total of  
l’excédent éventuel du total des montants  
suivants :  
(a) the amount, if any, by which  
a) l’excédent éventuel du total visé au sous-  
alinéa (i) sur le total visé au sous-alinéa (ii):  
(i) the total of all amounts each of which is  
the amount if any, by which  
(i) le total des montants dont chacun  
représente l’excédent éventuel :  
(A) the amount of the corporation’s capital  
gain from a disposition (other than a  
disposition that is the making of a gift after  
December 8, 1997 that is not a gift  
described in subsection 110.1(1)) of a  
property in the period beginning at the  
beginning of its first taxation year (that  
began after the corporation last became a  
private corporation and that ended after  
(A) d’un gain en capital de la société  
provenant de la disposition (sauf celle qui  
constitue un don effectué après le 8  
décembre 1997 qui n’est pas un don visé au  
paragraphe 110.1(1)) d’un bien au cours de la  
période commençant au début de sa première  
année d’imposition (ayant commencé après  
le moment où elle est devenue pour la  
dernière fois une société privée et s’étant  
terminée après 1971) et se terminant  
immédiatement avant le moment donné  
1
971) and ending immediately before the  
particular time (in this definition referred to  
as “the period”)  
(appelée « période » à la présente définition),  
exceeds the total of  
sur le total des montants suivants :  
(B) the portion of the capital gain referred  
to in clause (A) that is the corporation’s  
taxable capital gain, and  
(B) le gain en capital imposable de la société  
correspondant,  
(
C) the portion of the amount, if any, by  
which the amount determined under clause  
A) exceeds the amount determined under  
(C) la partie de l’excédent éventuel du  
montant calculé à la division (A) sur le  
montant calculé à la division (B), provenant  
de la disposition d’un bien par la société,  
qu’il est raisonnable de considérer comme  
s’étant accumulée pendant que le bien, ou un  
bien qui lui est substitué :  
(
clause (B) from the disposition by it of a  
property that can reasonably be regarded as  
having accrued while the property, or a  
property for which it was substituted,  
(
I) except in the case of a disposition of a  
designated property, was a property of a  
corporation (other than private  
(I) sauf dans le cas de la disposition d’un  
bien désigné, soit appartenait à une société  
— sauf une société privée, une société de  
placement, une société de placement  
hypothécaire ou une société de placement à  
capital variable —,  
a
corporation, an investment corporation, a  
mortgage investment corporation or a  
mutual fund corporation),  
(
II) where, after November 26, 1987, the  
(II) soit appartenait à une société contrôlée,  
directement ou indirectement, de quelque  
manière que ce soit, par une ou plusieurs  
personnes non-résidentes, si le bien est  
property became a property of a Canadian-  
controlled private corporation (otherwise  
than by reason of a change in the residence  
Page: 4  
of one or more shareholders of the  
corporation), was property of  
corporation controlled directly or indirectly  
in any manner whatever by one or more  
non-resident persons, or  
devenu, après le 26 novembre 1987, un bien  
a
a
d’une société privée sous contrôle canadien  
— autrement qu’à cause d’un changement de  
résidence d’un ou de plusieurs actionnaires  
de la société —,  
(
III) where, after November 26, 1987, the  
(III) soit appartenait à une société exonérée  
de l’impôt prévu à la présente partie sur son  
revenu imposable, si le bien est devenu,  
après le 26 novembre 1987, un bien d’une  
société privée qui n’était pas exonérée de  
l’impôt prévu à la présente partie sur son  
revenu imposable,  
property became a property of a private  
corporation that was not exempt from tax  
under this Part on its taxable income, was a  
property of a corporation exempt from tax  
under this Part on its taxable income,  
exceeds  
(ii) le total des montants dont chacun  
(ii) the total of all amounts each of which is  
représente l’excédent éventuel :  
the amount, if any, by which  
(A) d’une perte en capital de la société  
(
A) the amount of the corporation’s capital  
résultant de la disposition (sauf celle qui  
constitue un don effectué après le 8  
décembre 1997 que n’est pas un don visé au  
paragraphe 110.1(1)) d’un bien au cours de  
cette période,  
loss from a disposition (other than a  
disposition that is the making of a gift after  
December 8, 1997 that is not a gift  
described in subsection 110.1(1)) of a  
property in that period  
sur le total des montants suivants :  
exceeds the total of  
(B) la perte en capital déductible de la société  
(B) the part of the capital loss referred to in  
correspondante,  
clause (A) that is the corporation’s  
allowable capital loss, and  
(C) la partie de l’excédent éventuel du  
montant calculé à la division (A) sur le  
montant calculé à la division (B), provenant  
de la disposition d’un bien par la société,  
qu’il est raisonnable de considérer comme  
s’étant accumulée pendant que le bien, ou un  
bien qui lui est substitué :  
(
C) the portion of the amount, if any, by  
which the amount determined under clause  
A) exceeds the amount determined under  
(
clause (B) from the disposition by it of a  
property that can reasonably be regarded as  
having accrued while the property, or a  
property for which it was substituted,  
(I) sauf dans le cas de la disposition d’un  
bien désigné, soit appartenait à une société  
— sauf une société privée, une société de  
placement, une société de placement  
hypothécaire ou une société de placement à  
capital variable —,  
(
I) except in the case of a disposition of a  
designated property, was a property of a  
corporation (other than private  
a
corporation, an investment corporation, a  
mortgage investment corporation or a  
mutual fund corporation),  
(II) soit appartenait à une société contrôlée,  
directement ou indirectement, de quelque  
Page: 5  
(
II) where, after November 26, 1987, the  
manière que ce soit, par une ou plusieurs  
personnes non-résidentes, si le bien est  
devenu, après le 26 novembre 1987, un bien  
d’une société privée sous contrôle canadien  
— autrement qu’à cause d’un changement de  
résidence d’un ou de plusieurs actionnaires  
de la société —,  
property became a property of a Canadian-  
controlled private corporation (otherwise  
than by reason of a change in the residence  
of one or more shareholders of the  
corporation), was  
a
property of  
a
corporation controlled directly or indirectly  
in any manner whatever by one or more  
non-resident persons, or  
(III) soit appartenait à une société exonérée  
de l’impôt prévu à la présente partie sur son  
revenu imposable, si le bien est devenu,  
après le 26 novembre 1987, un bien d’une  
société privée qui n’était pas exonérée de  
l’impôt prévu à la présente partie sur son  
revenu imposable;  
(
III) where, after November 26, 1987, the  
property became a property of a private  
corporation that was not exempt from tax  
under this Part on its taxable income, was a  
property of a corporation exempt from tax  
under this Part on its taxable income,  
b) les sommes dont chacune constitue une  
somme reçue par la société au cours de la  
période, à titre de dividende versé sur une  
action du capital-actions d’une autre société,  
somme qui, en vertu du paragraphe 83(2),  
n’a pas été incluse dans le calcul du revenu  
de la société;  
(
b) all amounts each of which is an amount  
in respect of a dividend received by the  
corporation on a share of the capital stock  
of another corporation in the period, which  
amount was, by virtue of subsection 83(2),  
not included in computing the income of  
the corporation,  
c) les sommes représentant chacune une  
somme qui était à inclure selon le présent  
alinéa, dans sa version applicable à une  
année d’imposition terminée avant le 28  
février 2000,  
(
c) the total of all amounts each of which is  
an amount required to have been included  
under this paragraph as it read in its  
application to a taxation year that ended  
before February 28, 2000,  
c.1) l’excédent éventuel du montant suivant :  
(c.1) the amount, if any, by which  
(i) la moitié du total des montants  
(
i) 1/2 of the total of all amounts each of  
représentant chacun un montant à inclure en  
application de l’alinéa 14(1)b) dans le calcul  
du revenu de la société, relativement à une  
entreprise qu’elle exploite, pour une année  
d’imposition comprise dans la période et  
terminée après le 27 février 2000 et avant le  
18 octobre 2000,  
which is an amount required by paragraph  
4(1)(b) to be included in computing the  
1
corporation’s income in respect of a  
business carried on by the corporation for a  
taxation year that is included in the period  
and that ended after February 27, 2000 and  
before October 18, 2000,  
sur le montant applicable suivant :  
exceeds  
(ii) si la société a établi qu’une somme est  
(ii) where the corporation has deducted an  
devenue une créance irrécouvrable au cours  
amount under subsection 20(4.2) in respect  
d’une année d’imposition comprise dans la  
Page: 6  
of a debt established by it to have become a  
bad debt in a taxation year that is included  
in the period and that ended after February  
période et terminée après le 27 février 2000  
et avant le 18 octobre 2000 et a déduit un  
montant au titre de cette somme en  
application du paragraphe 20(4.2), ou si elle  
a une perte en capital déductible pour une  
telle année par l’effet du paragraphe 20(4.3),  
le montant obtenu par la formule suivante :  
2
7, 2000 and before October 18, 2000, or  
has an allowable capital loss for such a year  
because of the application of subsection  
2
0(4.3), the amount determined by the  
formula  
V + W  
where  
V
V + W  
où :  
V
représente la moitié de la valeur de l’élément  
A de la formule figurant au paragraphe  
20(4.2), déterminée relativement à la société  
pour la dernière année d’imposition  
semblable terminée dans la période,  
is 1/2 of the value determined for A under  
subsection 20(4.2) in respect of the  
corporation for the last such taxation year  
that ended in the period, and  
W
W
is 1/3 of the value determined for B under  
subsection 20(4.2) in respect of the  
corporation for the last such taxation year  
that ended in the period, and  
le tiers de la valeur de l’élément B de cette  
formule, déterminée relativement à la société  
pour cette dernière année d’imposition,  
(
iii) dans les autres cas, zéro,  
c.2) l’excédent éventuel du montant suivant :  
i) le total des montants représentant chacun  
(
(
(
iii) in any other case, nil,  
c.2) the amount, if any, by which  
(
i) the total of all amounts each of which is  
un montant à inclure en application de  
l’alinéa 14(1)b) dans le calcul du revenu de  
la société, relativement à une entreprise  
qu’elle exploite, pour une année d’imposition  
comprise dans la période et se terminant  
après le 17 octobre 2000,  
an amount required by paragraph 14(1)(b)  
to be included in computing the  
corporation’s income in respect of a  
business carried on by the corporation for a  
taxation year that is included in the period  
and that ends after October 17, 2000,  
sur le montant applicable suivant :  
exceeds  
(ii) si la société a établi qu’une somme est  
(
ii) where the corporation has deducted an  
devenue une créance irrécouvrable au cours  
d’une année d’imposition comprise dans la  
période et se terminant après le 17 octobre  
2000 et a déduit un montant au titre de cette  
somme en application du paragraphe 20(4.2),  
amount under subsection 20(4.2) in respect  
of a debt established by it to have become a  
bad debt in a taxation year that is included  
in the period and that ends after October 17,  
Page: 7  
2
000, or has an allowable capital loss for  
ou si elle a une perte en capital déductible  
pour une telle année par l’effet du paragraphe  
20(4.3), le montant obtenu par la formule  
suivante :  
such a year because of the application of  
subsection 20(4.3), the amount determined  
by the formula  
X + Y  
Where  
X
X + Y  
où :  
X
is the value determined for A under  
subsection 20(4.2) in respect of the  
corporation for the last such taxation year  
that ended in the period, and  
représente la valeur de l’élément A de la  
formule figurant au paragraphe 20(4.2),  
déterminée relativement à la société pour la  
dernière année d’imposition semblable  
terminée dans la période,  
Y
Y
is 1/3 of the value determined for B under  
subsection 20(4.2) in respect of the  
corporation for the last such taxation year  
that ended in the period, and  
le tiers de la valeur de l’élément B de cette  
formule, déterminée relativement à la société  
pour cette dernière année d’imposition,  
(
(
(
iii) in any other case, nil,  
(iii) dans les autres cas, zéro,  
d) the amount, if any, by which the total of  
i) all amounts each of which is the  
d) l’excédent éventuel du total des montants  
suivants :  
proceeds of a life insurance policy of which  
the corporation was a beneficiary on or  
before June 28, 1982 received by the  
corporation in the period and after 1971 in  
consequence of the death of any person,  
and  
(i) les montants dont chacun représente le  
produit d’une police d’assurance-vie dont la  
société était bénéficiaire au plus tard le 28  
juin 1982 que la société a reçu au cours de la  
période et après 1971 par suite du décès  
d’une personne,  
(
ii) all amounts each of which is the  
(ii) les montants dont chacun représente le  
produit d’une police d’assurance-vie dont la  
société n’était pas bénéficiaire au plus tard le  
28 juin 1982 que la société a reçu au cours de  
la période et après le 23 mai 1985 par suite  
du décès d’une personne,  
proceeds of a life insurance policy of which  
the corporation was not a beneficiary on or  
before June 28, 1982 received by the  
corporation in the period and after May 23,  
1
985 in consequence of the death of any  
person exceeds the total of all amounts each  
of which is the adjusted cost basis (within  
the meaning assigned by subsection 148(9))  
of a policy referred to in subparagraph (i) or  
sur le total des montants dont chacun  
représente le coût de base rajusté (au sens du  
paragraphe 148(9)) d’une police visée au  
sous-alinéa (i) ou (ii) pour la société  
(ii) to the corporation immediately before  
Page: 8  
that person’s death,  
immédiatement avant le décès de cette  
personne;  
(
e) the amount of the corporation’s life  
insurance capital dividend account  
immediately before May 24, 1985, and  
e) le montant du compte de dividendes en  
capital d’assurance-vie de la société  
immédiatement avant le 24 mai 1985, sur le  
total des dividendes en capital devenus  
payables par la société après le début de la  
période et avant le moment donné;  
(
f) all amounts each of which is an amount  
in respect of a distribution made in the  
period by a trust to the corporation in  
respect of capital gains of the trust equal to  
the lesser of  
f) le total des montants représentant chacun  
un montant relatif à une attribution qu’une  
fiducie a effectuée sur ses gains en capital en  
faveur de la société au cours de la période et  
dont le montant est égal au moins élevé des  
montants suivants :  
(
i) the amount, if any, by which  
A) the amount of the distribution  
(
exceeds  
(i) l’excédent éventuel du montant visé à la  
(
1
B)the amount designated under subsection  
04(21) by the trust (other than a  
division (A) sur le montant visé à la division  
(B):  
designation to which subsection 104(21.4)  
applies) in respect of the net taxable capital  
gains of the trust attributable to those  
capital gains, and  
(A) le montant de l’attribution,  
(B) le montant que la fiducie a attribué à la  
société en application du paragraphe 104(21)  
(sauf s’il s’agit d’une attribution à laquelle le  
paragraphe 104(21.4) s’applique) sur ses  
gains en capital imposables nets qui sont  
imputables aux gains en capital en question,  
(ii) the amount determined by the formula  
A × B  
where  
A
(ii) le montant obtenu par la formule  
suivante :  
A × B  
où :  
is the fraction or whole number determined  
when 1 is subtracted from the reciprocal of  
the fraction under paragraph 38(a)  
applicable to the trust for the year, and  
A
B
représente le nombre entier ou la fraction  
obtenu lorsque 1 est soustrait de l’inverse de  
la fraction figurant à l’alinéa 38a) qui  
s’applique à la fiducie pour l’année,  
is the amount referred to in clause (i) (B),  
and  
(g) all amounts each of which is an amount  
in respect of a distribution made by a trust  
to the corporation in the period in respect of  
B
Page: 9  
a dividend (other than a taxable dividend)  
B le montant mentionné à la division (i)(B),  
paid on a share of the capital stock of  
another corporation resident in Canada to  
the trust during a taxation year of the trust  
throughout which the trust was resident in  
Canada equal to the lesser of  
g) le total des montants représentant chacun  
un montant relatif à une attribution qu’une  
fiducie a effectuée en faveur de la société au  
cours de la période au titre d’un dividende  
(sauf un dividende imposable) qui a été versé  
(i) the amount of the distribution, and  
à la fiducie au cours d’une année  
d’imposition de celle-ci tout au long de  
laquelle elle a résidé au Canada, sur une  
action du capital-actions d’une autre société  
résidant au Canada, et dont le montant est  
égal au moins élevé des montants suivants :  
(
1
ii) the amount designated under subsection  
04(20) by the trust in respect of the  
corporation in respect of that dividend,  
exceeds the total of all capital dividends  
that became payable by the corporation  
after the commencement of the period and  
before the particular time; (compte de  
dividendes en capital)  
(i) le montant de l’attribution,  
(ii) le montant que la fiducie a attribué à la  
société en application du paragraphe 104(20)  
au titre du dividende,  
(…)  
Les fiducies et leurs bénéficiaires  
Fiducie ou succession  
1
04(1) Dans la présente loi, la mention d’une  
fiducie ou d’une succession (appelées «  
fiducie » à la présente sous-section) vaut  
également mention, sauf indication contraire  
du contexte, du fiduciaire, de l’exécuteur  
Trusts and their Beneficiaries  
1
04(1) In this Act, a reference to a trust or  
estate (in this subdivision referred to as a  
trust”) shall, unless the context otherwise  
testamentaire,  
de  
l’administrateur  
“
successoral, du liquidateur de succession, de  
l’héritier ou d’un autre représentant légal  
ayant la propriété ou le contrôle des biens de  
la fiducie. Toutefois, sauf pour l’application  
du présent paragraphe, du paragraphe (1.1),  
du sous-alinéa b)(v) de la définition de  
disposition au paragraphe 248(1) et de  
l’alinéa k) de cette définition, l’arrangement  
dans le cadre duquel il est raisonnable de  
considérer qu’une fiducie agit en qualité de  
requires, be read to include a reference to  
the trustee, executor, administrator,  
liquidator of a succession, heir or other  
legal representative having ownership or  
control of the trust property, but, except for  
the purposes of this subsection, subsection  
(1.1), subparagraph (b)(v) of the definition  
disposition in subsection 248(1) and  
paragraph (k) of that definition, a trust is  
deemed not to include an arrangement  
under which the trust can reasonably be  
considered to act as agent for all the  
beneficiaries under the trust with respect to  
all dealings with all of the trust’s property  
unless the trust is described in any of  
paragraphs (a) to (e.1) of the definition trust  
mandataire  
de  
l’ensemble  
de  
ses  
bénéficiaires pour ce qui est des opérations  
portant sur ses biens est réputé ne pas être  
une fiducie, sauf si la fiducie est visée à l’un  
des alinéas a) à e.1) de la définition de  
Page: 10  
in subsection 108(1).  
…)  
Taxed as individual  
04(2) A trust shall, for the purposes of this  
Act, and without affecting the liability of  
the trustee or legal representative for that  
person’s own income tax, be deemed to be  
in respect of the trust property an  
individual, but where there is more than one  
trust and  
fiducie au paragraphe 108(1).  
(
Impôt à titre de particulier  
104(2) Pour l’application de la présente loi,  
et sans que l’assujettissement du fiduciaire  
ou des représentants légaux à leur propre  
impôt sur le revenu en soit atteint, une  
fiducie est réputée être un particulier  
relativement aux biens de la fiducie; mais  
lorsqu’il existe plus d’une fiducie et que :  
1
Fiducie d’investissement à participation  
unitaire  
(
…)  
When trust is a unit trust  
08(2) For the purposes of this Act, a trust  
1
08(2) Pour l’application de la présente loi,  
une fiducie est une fiducie d’investissement à  
participation unitaire à un moment donné si,  
à ce moment, elle est une fiducie non  
1
is a unit trust at any particular time if, at  
that time, it was an inter vivos trust the  
interest of each beneficiary under which  
was described by reference to units of the  
trust, and  
testamentaire  
dans  
laquelle  
chaque  
bénéficiaire possède une participation qui est  
définie par rapport aux unités de la fiducie, et  
si :  
a) soit les unités émises de la fiducie  
comprennent :  
(a) the issued units of the trust included  
(
i) units having conditions attached thereto  
(i) ou bien des unités qui comportent des  
conditions, entre autres celles exigeant que la  
fiducie accepte, à la demande du détenteur de  
ces unités et à un prix déterminé et payable  
conformément aux conditions fixées, de  
racheter les unités, ou les parties ou fractions  
de celles-ci, qui sont entièrement libérées,  
that included conditions requiring the trust  
to accept, at the demand of the holder  
thereof and at prices determined and  
payable in accordance with the conditions,  
the surrender of the units, or fractions or  
parts thereof, that are fully paid, or  
(
ii) units qualified in accordance with  
(ii) ou bien des unités qui satisfont à  
certaines conditions prescrites relatives au  
rachat des unités par la fiducie,  
prescribed conditions relating to the  
redemption of the units by the trust, and the  
fair market value of such of the units as had  
conditions attached thereto that included  
such conditions or as were so qualified, as  
the case may be, was not less than 95% of  
the fair market value of all of the issued  
units of the trust (such fair market values  
being determined without regard to any  
et si la juste valeur marchande des unités qui  
comportent certaines conditions, entre autres  
celles qui sont mentionnées ci-dessus ou qui  
satisfont aux conditions susmentionnées,  
selon le cas, n’est pas inférieure à 95 % de la  
juste valeur marchande de toutes les unités  
émises de la fiducie (cette juste valeur  
Page: 11  
voting rights attaching to units of the trust);  
marchande étant déterminée compte non tenu  
des droits de vote afférents aux unités de la  
fiducie);  
(…)  
Exonération d’impôt d’une fiducie régie  
par le régime  
(
…)  
146(4) Sous réserve du paragraphe (10.1),  
aucun impôt n’est payable en vertu de la  
présente partie par une fiducie sur son revenu  
imposable pour une année d’imposition si,  
tout au long de la période de l’année où la  
fiducie existait, elle était régie par un régime  
enregistré d’épargne-retraite; toutefois :  
No tax while trust governed by plan  
1
1
46(4) Except as provided in subsection  
46(10.1), no tax is payable under this Part  
by a trust on the taxable income of the trust  
for a taxation year if, throughout the period  
in the year during which the trust was in  
existence, the trust was governed by a  
registered retirement savings plan, except  
that  
a) si la fiducie a emprunté de l’argent (autre  
que de l’argent utilisé pour l’exploitation  
d’une entreprise) au cours de l’année ou a  
emprunté, après le 18 juin 1971, de l’argent  
(
autre que de l’argent utilisé pour  
(
a) if the trust has borrowed money (other  
l’exploitation d’une entreprise) qu’elle n’a  
pas remboursé avant le début de l’année, un  
impôt est payable par la fiducie, en vertu de  
la présente partie, sur son revenu imposable  
pour l’année;  
than money used in carrying on a business)  
in the year or has, after June 18, 1971,  
borrowed money (other than money used in  
carrying on a business) that it has not repaid  
before the commencement of the year, tax  
is payable under this Part by the trust on its  
taxable income for the year;  
b) dans tout cas non visé à l’alinéa a), si la  
fiducie  
a
exploité une ou plusieurs  
entreprises au cours de l’année, un impôt est  
payable par elle en vertu de la présente partie  
sur l’excédent éventuel du montant visé au  
sous-alinéa (i) sur le montant visé au sous-  
alinéa (ii):  
(
1
b) in any case not described in paragraph  
46(4)(a), if the trust has carried on any  
business or businesses in the year, tax is  
payable under this Part by the trust on the  
amount, if any, by which  
(
i) le montant qui constituerait le revenu  
(
i) the amount that its taxable income for  
imposable de la fiducie pour l’année si elle  
n’avait pas tiré de revenu, ni subi de pertes  
de sources autres que l’entreprise ou les  
entreprises en question,  
the year would be if it had no incomes or  
losses from sources other than from that  
business or those businesses, as the case  
may be,  
(
ii) la partie du montant déterminé selon le  
exceeds  
sous-alinéa (i) à l’égard de la fiducie pour  
l’année, qu’il est raisonnable de considérer  
comme un revenu provenant soit de  
placements admissibles pour elle, soit de la  
(ii) such portion of the amount determined  
under subparagraph 146(4)(b)(i) in respect  
of the trust for the year as can reasonably be  
considered to be income from, or from the  
Page: 12  
disposition of, qualified investments for the  
trust; and  
disposition de tels placements;  
c) si le dernier rentier en vertu du régime est  
décédé, un impôt est payable par la fiducie  
en vertu de la présente partie sur son revenu  
imposable pour chaque année postérieure à  
l’année suivant l’année du décès de ce  
rentier.  
(
c) if the last annuitant under the plan has  
died, tax is payable under this Part by the  
trust on its taxable income for each year  
after the year following the year in which  
the last annuitant died.  
(
…)  
Benefits taxable  
46(8) There shall be included in  
Prestations imposables  
146(8) Est inclus dans le calcul du revenu  
d’un contribuable pour une année  
d’imposition le total des montants qu’il a  
reçus au cours de l’année à titre de  
prestations dans le cadre de régimes  
enregistrés d’épargne-retraite, à l’exception  
des retraits exclus au sens des paragraphes  
146.01(1) ou 146.02(1), et des montants qui  
sont inclus, en application de l’alinéa (12)b),  
dans le calcul de son revenu.  
1
computing a taxpayer’s income for a  
taxation year the total of all amounts  
received by the taxpayer in the year as  
benefits out of or under registered  
retirement savings plans, other than  
excluded withdrawals (as defined in  
subsection 146.01(1) or 146.02(1)) of the  
taxpayer and amounts that are included  
under paragraph (12)(b) in computing the  
taxpayer’s income.  
Cotisation  
1
52(1) Le ministre, avec diligence, examine  
(
…)  
Assessment  
52(1) The Minister shall, with all due  
la déclaration de revenu d’un contribuable  
pour une année d’imposition, fixe l’impôt  
pour l’année, ainsi que les intérêts et les  
pénalités éventuels payables et détermine  
(…)  
1
dispatch, examine a taxpayer’s return of  
income for a taxation year, assess the tax  
for the year, the interest and penalties, if  
any, payable and determine  
Responsabilité indépendante de l’avis  
(
…)  
Liability not dependent on assessment  
52(3) Liability for the tax under this Part  
1
52(3) Le fait qu’une cotisation est inexacte  
ou incomplète ou qu’aucune cotisation n’a  
été faite n’a pas d’effet sur les responsabilités  
du contribuable à l’égard de l’impôt prévu  
par la présente partie.  
1
is not affected by an incorrect or incomplete  
assessment or by the fact that no assessment  
has been made.  
Cotisation et nouvelle cotisation  
1
52(4) Le ministre peut établir une  
(…)  
cotisation, une nouvelle cotisation ou une  
cotisation supplémentaire concernant l’impôt  
Page: 13  
Assessment and reassessment  
52(4) The Minister may at any time make  
pour une année d’imposition, ainsi que les  
intérêts ou les pénalités, qui sont payables  
par un contribuable en vertu de la présente  
partie ou donner avis par écrit qu’aucun  
impôt n’est payable pour l’année à toute  
personne qui a produit une déclaration de  
revenu pour une année d’imposition. Pareille  
cotisation ne peut être établie après  
l’expiration de la période normale de  
1
an assessment, reassessment or additional  
assessment of tax for a taxation year,  
interest or penalties, if any, payable under  
this Part by a taxpayer or notify in writing  
any person by whom a return of income for  
a taxation year has been filed that no tax is  
payable for the year, except that an  
assessment, reassessment or additional  
assessment may be made after the  
taxpayer’s normal reassessment period in  
respect of the year only if  
nouvelle  
cotisation  
applicable  
au  
contribuable pour l’année que dans les cas  
suivants :  
a) le contribuable ou la personne produisant  
la déclaration :  
(a) the taxpayer or person filing the return  
(i) soit a fait une présentation erronée des  
(
i) has made any misrepresentation that is  
faits, par négligence, inattention ou omission  
volontaire, ou a commis quelque fraude en  
produisant la déclaration ou en fournissant  
quelque renseignement sous le régime de la  
présente loi,  
attributable to neglect, carelessness or  
wilful default or has committed any fraud in  
filing the return or in supplying any  
information under this Act, or  
(
ii) has filed with the Minister a waiver in  
(ii) soit a présenté au ministre une  
renonciation, selon le formulaire prescrit, au  
cours de la période normale de nouvelle  
cotisation applicable au contribuable pour  
l’année;  
prescribed form within the normal  
reassessment period for the taxpayer in  
respect of the year; or  
(…)  
Présomption de validité de la cotisation  
1
52(8) Sous réserve des modifications qui  
peuvent y être apportées ou de son  
annulation lors d’une opposition ou d’un  
appel fait en vertu de la présente partie et  
sous réserve d’une nouvelle cotisation, une  
cotisation est réputée être valide et exécutoire  
malgré toute erreur, tout vice de forme ou  
toute omission dans cette cotisation ou dans  
toute procédure s’y rattachant en vertu de la  
présente loi.  
Assessment deemed valid and binding  
52(8) An assessment shall, subject to  
being varied or vacated on an objection or  
appeal under this Part and subject to a  
reassessment, be deemed to be valid and  
binding notwithstanding any error, defect or  
omission in the assessment or in any  
proceeding under this Act relating thereto.  
1
Faux énoncés ou omissions  
(…)  
1
63(2) Toute personne qui, sciemment ou  
False statements or omissions  
dans des circonstances équivalant à faute  
Page: 14  
1
63(2) Every person who, knowingly, or  
lourde, fait un faux énoncé ou une omission  
dans une déclaration, un formulaire, un  
certificat, un état ou une réponse (appelé «  
déclaration » au présent article) rempli,  
produit ou présenté, selon le cas, pour une  
année d’imposition pour l’application de la  
présente loi, ou y participe, y consent ou y  
acquiesce est passible d’une pénalité égale,  
sans être inférieure à 100 $, à 50 % du total  
des montants suivants :  
under circumstances amounting to gross  
negligence, has made or has participated in,  
assented to or acquiesced in the making of,  
a false statement or omission in a return,  
form, certificate, statement or answer (in  
this section referred to as a “return”) filed  
or made in respect of a taxation year for the  
purposes of this Act, is liable to a penalty of  
the greater of $100 and 50% of the total of  
(
…)  
Duties of Minister  
65(3) On receipt of a notice of objection  
Obligations du ministre  
165(3) Sur réception de l’avis d’opposition,  
le ministre, avec diligence, examine de  
nouveau la cotisation et l’annule, la ratifie ou  
la modifie ou établit une nouvelle cotisation.  
Dès lors, il avise le contribuable de sa  
décision par écrit.  
1
under this section, the Minister shall, with  
all due dispatch, reconsider the assessment  
and vacate, confirm or vary the assessment  
or reassess, and shall thereupon notify the  
taxpayer in writing of the Minister’s action.  
(
…)  
Irregularities  
66 An assessment shall not be vacated or  
Irrégularités  
1
66 Une cotisation ne peut être annulée ni  
1
modifiée lors d’un appel uniquement par  
suite d’irrégularité, de vice de forme,  
d’omission ou d’erreur de la part de qui que  
ce soit dans l’observation d’une disposition  
simplement directrice de la présente loi.  
varied on appeal by reason only of any  
irregularity, informality, omission or error  
on the part of any person in the observation  
of any directory provision of this Act.  
(
…)  
Additional Tax on Excessive Elections  
84(2) Where a corporation has elected in  
Impôt supplémentaire sur les excédents  
résultant d’un choix  
1
84(2) La société qui fait un choix en vertu  
1
du paragraphe 83(2), 130.1(4) ou 131(1)  
relativement au montant total d’un dividende  
payable par elle sur des actions d’une  
catégorie de son capital-actions doit payer,  
au moment du choix, un impôt en vertu de la  
présente partie égal aux 3/4 de l’excédent  
éventuel du montant total du dividende sur la  
partie de celui-ci réputée, selon l’un de ces  
paragraphes, être un dividende en capital ou  
accordance with subsection 83(2), 130.1(4)  
or 131(1) in respect of the full amount of  
any dividend payable by it on shares of any  
class of its capital stock and the full amount  
of the dividend exceeds the portion thereof  
deemed by that subsection to be a capital  
dividend or capital gains dividend, as the  
case may be, the corporation shall, at the  
time of the election, pay a tax under this  
Page: 15  
Part equal to 3/4 of the excess.  
…)  
un dividende sur les gains en capital.  
(
Choix de considérer l’excédent comme un  
dividende distinct  
Election to treat excess as separate  
dividend  
184(3) Lorsque, à l’égard d’un dividende  
payable à un moment donné après 1971, une  
société serait, sans le présent paragraphe,  
tenue de paye un impôt, en vertu de la  
présente partie, égal à la totalité ou à une  
partie de l’excédent visé au paragraphe (2)  
du présent article ou au paragraphe 184(1) de  
la Loi de l’impôt sur le revenu, chapitre 148  
des Statuts revisés du Canada de 1952, elle  
1
84(3) Where, in respect of a dividend  
payable at a particular time after 1971, a  
corporation would, but for this subsection,  
be required to pay a tax under this Part  
equal to all or a portion of an excess  
referred to in subsection (2) of this section  
or subsection 184(1) of the Income Tax  
Act, chapter 148 of the Revised Statutes of  
Canada, 1952, it may elect in prescribed  
manner on or before a day that is not later  
than 90 days after the day that is the later of  
December 15, 1977 and the day of mailing  
of the notice of assessment in respect of the  
tax that would otherwise be payable under  
this Part, and on such an election being  
made, subject to subsection 184(4), the  
following rules apply:  
peut  
choisir  
selon  
les  
modalités  
réglementaires au plus tard un jour qui tombe  
dans les 90 jours suivant le dernier en date du  
15 décembre 1977 et du jour de la mise à la  
poste de l’avis de cotisation relatif à l’impôt  
qui serait par ailleurs payable en vertu de la  
présente partie, et si elle exerce un tel choix,  
sous réserve du paragraphe (4), les règles  
suivantes s’appliquent :  
a) la partie du montant total du dividende qui  
dépasse l’excédent est réputée, aux fins du  
choix que la société a fait relativement à ce  
dividende en vertu du paragraphe 83(2),  
130.1(4) ou 131(1) de la présente loi ou du  
paragraphe 83(1) de la Loi de l’impôt sur le  
revenu, chapitre 148 des Statuts revisés du  
Canada de 1952, et à toutes autres fins  
prévues par la présente loi, être le montant  
total d’un dividende distinct qui est devenu  
payable au moment donné;  
(
a) the amount by which the full amount of  
the dividend exceeds the amount of the  
excess shall be deemed for the purposes of  
the election that the corporation made in  
respect of the dividend under subsection  
8
3(2), 130.1(4) or 131(1) of this Act or  
subsection 83(1) of the Income Tax Act,  
chapter 148 of the Revised Statutes of  
Canada, 1952, and for all other purposes of  
this Act to be the full amount of a separate  
dividend that became payable at the  
particular time;  
b) la partie de l’excédent que peut déduire la  
société est réputée, aux fins d’un choix y  
relatif en vertu du paragraphe 83(2), 130.1(4)  
ou 131(1) de la présente loi ou du paragraphe  
83(1) de la Loi de l’impôt sur le revenu,  
chapitre 148 des Statuts revisés du Canada de  
1952, et, en cas d’un tel choix par la société,  
à toutes fins prévues par la présente loi, être  
le montant total d’un dividende distinct qui  
est devenu payable immédiatement après le  
(b) such part of the excess as the  
corporation may claim shall, for the  
purposes of any election in respect thereof  
under subsection 83(2), 130.1(4) or 131(1)  
of this Act or subsection 83(1) of the  
Income Tax Act, chapter 148 of the  
Revised Statutes of Canada, 1952, and,  
where the corporation has so elected, for all  
Page: 16  
purposes of this Act, be deemed to be the  
moment donné;  
full amount of a separate dividend that  
became payable immediately after the  
particular time;  
c) le montant de l’excédent qui est en sus de  
la partie du dividende qui, en vertu de  
l’alinéa b), est réputée être un dividende  
distinct pour l’application de la présente loi  
est réputé être un dividende distinct  
imposable qui est devenu payable au moment  
donné;  
(c) the amount by which the excess exceeds  
any portion deemed by paragraph 184(3)(b)  
to be a separate dividend for all purposes of  
this Act shall be deemed to be a separate  
dividend that is a taxable dividend that  
became payable at the particular time; and  
d) chacune des personnes qui détenaient des  
actions émises de la catégorie d’actions du  
capital-actions de la société sur laquelle le  
montant global du dividende a été versé est  
réputée :  
(d) each person who held any of the issued  
shares of the class of shares of the capital  
stock of the corporation in respect of which  
the full amount of the dividend was paid  
shall be deemed  
(i) n’avoir reçu aucune partie du dividende,  
(
i) not to have received any portion of the  
(ii) avoir reçu, au moment du versement du  
dividende, la fraction de tout dividende  
distinct déterminé en vertu de l’alinéa a), b)  
ou c) qui est représentée par le rapport entre  
le nombre d’actions de cette catégorie qu’elle  
détenait au moment du versement du  
dividende et le nombre d’actions de cette  
catégorie qui étaient en circulation à ce  
moment; toutefois, pour l’application de la  
partie XIII, un dividende distinct qui est un  
dividende imposable, un dividende en capital  
ou un dividende en capital d’assurance-vie  
est réputé avoir été versé le jour de l’exercice  
du choix en vertu du présent paragraphe.  
dividend, and  
(ii) to have received at the time the  
dividend was paid the proportion of any  
separate dividend, determined under  
paragraph  
184(3)(a),  
184(3)(b)  
or  
1
84(3)(c), that the number of shares of that  
class held by the person at the time the  
dividend was paid is of the number of  
shares of that class outstanding at that time  
except that, for the purpose of Part XIII, a  
separate dividend that is a taxable dividend,  
a capital dividend or a life insurance capital  
dividend shall be deemed to have been paid  
on the day that the election in respect of this  
subsection is made.  
(…)  
Provisions applicable to Part  
Dispositions applicables  
1
1
1
85(3) Subsections 152(3), 152(4), 152(5),  
52(7) and 152(8) and 161(11), sections  
63 to 167 and Division J of Part I are  
185(3) Les paragraphes 152(3), (4), (5), (7)  
et (8) et 161(11), les articles 163 à 167 et la  
section J de la partie I s’appliquent à la  
présente partie, avec les adaptations  
nécessaires.  
applicable to this Part with such  
modifications as the circumstances require.  
Page: 17  
(…)  
Impôt relatif aux régimes de revenu  
différé et à d’autres personnes exonérées  
d’impôt  
Tax in Respect of Deferred Income Plans  
and Other Tax Exempt Persons  
Impôt payable par les fiducies régies par  
Tax payable by trust under registered  
retirement savings plan  
des régimes enregistrés d’épargne-retraite  
2
07.1(1) La fiducie régie par un régime  
2
07.1(1) Where, at the end of any month, a  
enregistré d’épargne-retraite et qui, à la fin  
d’un mois donné, détient des biens qui ne  
sont ni un placement admissible (au sens du  
trust governed by a registered retirement  
savings plan holds property that is neither a  
qualified investment (within the meaning  
assigned by subsection 146(1)) nor a life  
insurance policy in respect of which, but for  
subsection 146(11), subsection 146(10)  
would have applied as a consequence of its  
acquisition, the trust shall, in respect of that  
month, pay a tax under this Part equal to  
paragraphe  
146(1))  
ni  
une  
police  
d’assurance-vie à l’égard de laquelle, sans le  
paragraphe 146(11), le paragraphe 146(10)  
aurait été applicable à la suite de son  
acquisition doit payer, pour ce mois, en vertu  
de la présente partie, un impôt égal à 1 % de  
la juste valeur marchande des biens au  
moment où ils ont été acquis par la fiducie,  
de tous ces biens qu’elle détient à la fin du  
mois, autres que :  
1
% of the fair market value of the property  
at the time it was acquired by the trust of all  
such property held by it at the end of the  
month, other than  
a) les biens dont la juste valeur marchande a  
été incluse, en vertu du paragraphe 146(10),  
dans le calcul du revenu, pour une année  
donnée, d’un rentier (au sens du paragraphe  
146(1)) en vertu du régime;  
(
a) property, the fair market value of which  
was included, by virtue of subsection  
46(10), in computing the income, for any  
1
year, of an annuitant (within the meaning  
assigned by subsection 146(1)) under the  
plan; and  
b) les biens acquis par la fiducie avant le 25  
août 1972.  
(b) property acquired by the trust before  
August 25, 1972.  
(
…)  
Évitement fiscal  
Définitions  
Tax Avoidance  
Definitions  
2
45(1) Les définitions qui suivent  
s’appliquent au présent article.  
2
45(1) In this section, tax benefit means a  
reduction, avoidance or deferral of tax or  
other amount payable under this Act or an  
increase in a refund of tax or other amount  
under this Act, and includes a reduction,  
avoidance or deferral of tax or other amount  
that would be payable under this Act but for  
attribut fiscal S’agissant des attributs fiscaux  
d’une personne, revenu, revenu imposable ou  
revenu imposable gagné au Canada de cette  
personne, impôt ou autre montant payable  
par cette personne, ou montant qui lui est  
remboursable, en application de la présente  
Page: 18  
a tax treaty or an increase in a refund of tax  
or other amount under this Act as a result of  
a tax treaty; (avantage fiscal)  
loi, ainsi que tout montant à prendre en  
compte pour calculer, en application de la  
présente loi, le revenu, le revenu imposable,  
le revenu imposable gagné au Canada de  
cette personne ou l’impôt ou l’autre montant  
payable par cette personne ou le montant qui  
lui est remboursable. (tax consequences)  
tax consequences to a person means the  
amount of income, taxable income, or  
taxable income earned in Canada of, tax or  
other amount payable by or refundable to  
the person under this Act, or any other  
amount that is relevant for the purposes of  
computing that amount; (attribut fiscal)  
avantage fiscal Réduction, évitement ou  
report d’impôt ou d’un autre montant  
exigible en application de la présente loi ou  
augmentation d’un remboursement d’impôt  
ou d’un autre montant visé par la présente  
loi. Y sont assimilés la réduction, l’évitement  
ou le report d’impôt ou d’un autre montant  
qui serait exigible en application de la  
présente loi en l’absence d’un traité fiscal  
transaction includes an arrangement or  
event. (opération)  
ainsi  
que  
l’augmentation  
d’un  
remboursement d’impôt ou d’un autre  
montant visé par la présente loi qui découle  
d’un traité fiscal. (tax benefit)  
opération Sont assimilés à une opération une  
convention, un mécanisme ou un événement.  
(
transaction)  
Disposition générale anti-évitement  
45(2) En cas d’opération d’évitement, les  
General anti-avoidance provision  
2
attributs fiscaux d’une personne doivent être  
déterminés de façon raisonnable dans les  
circonstances de façon à supprimer un  
avantage fiscal qui, sans le présent article,  
découlerait, directement ou indirectement, de  
cette opération ou d’une série d’opérations  
dont cette opération fait partie.  
2
45(2) Where a transaction is an avoidance  
transaction, the tax consequences to a  
person shall be determined as is reasonable  
in the circumstances in order to deny a tax  
benefit that, but for this section, would  
result, directly or indirectly, from that  
transaction or from a series of transactions  
that includes that transaction.  
Opération d’évitement  
Avoidance transaction  
2
45(3) L’opération d’évitement s’entend :  
2
45(3) An avoidance transaction means any  
a) soit de l’opération dont, sans le présent  
article, découlerait, directement ou  
transaction  
indirectement, un avantage fiscal, sauf s’il est  
raisonnable de considérer que l’opération est  
principalement effectuée pour des objets  
(
a) that, but for this section, would result,  
directly or indirectly, in a tax benefit, unless  
the transaction may reasonably be  
Page: 19  
considered to have been undertaken or  
arranged primarily for bona fide purposes  
other than to obtain the tax benefit; or  
véritables — l’obtention de l’avantage fiscal  
n’étant pas considérée comme un objet  
véritable;  
(
b) that is part of a series of transactions,  
b) soit de l’opération qui fait partie d’une  
série d’opérations dont, sans le présent  
which series, but for this section, would  
result, directly or indirectly, in a tax benefit,  
unless the transaction may reasonably be  
considered to have been undertaken or  
arranged primarily for bona fide purposes  
other than to obtain the tax benefit.  
article,  
découlerait,  
directement  
ou  
indirectement, un avantage fiscal, sauf s’il est  
raisonnable de considérer que l’opération est  
principalement effectuée pour des objets  
véritables — l’obtention de l’avantage fiscal  
n’étant pas considérée comme un objet  
véritable.  
Application of subsection (2)  
2
45(4) Subsection (2) applies to  
a
Application du par. (2)  
transaction only if it may reasonably be  
considered that the transaction  
245(4) Le paragraphe (2) ne s’applique qu’à  
l’opération dont il est raisonnable de  
considérer, selon le cas :  
(a) would, if this Act were read without  
reference to this section, result directly or  
indirectly in a misuse of the provisions of  
any one or more of  
a) qu’elle entraînerait, directement ou  
indirectement, s’il n’était pas tenu compte du  
présent article, un abus dans l’application des  
dispositions d’un ou de plusieurs des textes  
suivants :  
(
(
(
(
(
i) this Act,  
ii) the Income Tax Regulations,  
iii) the Income Tax Application Rules,  
iv) a tax treaty, or  
(
(
(
i) la présente loi,  
ii) le Règlement de l’impôt sur le revenu,  
iii) les Règles concernant l’application de  
v) any other enactment that is relevant in  
l’impôt sur le revenu,  
computing tax or any other amount payable  
by or refundable to a person under this Act  
or in determining any amount that is  
relevant for the purposes of that  
computation; or  
(iv) un traité fiscal,  
(v) tout autre texte législatif qui est utile soit  
pour le calcul d’un impôt ou de toute autre  
somme exigible ou remboursable sous le  
régime de la présente loi, soit pour la  
détermination de toute somme à prendre en  
compte dans ce calcul;  
(b) would result directly or indirectly in an  
abuse having regard to those provisions,  
other than this section, read as a whole.  
b) qu’elle entraînerait, directement ou  
indirectement, un abus dans l’application de  
ces dispositions compte non tenu du présent  
Page: 20  
Determination of tax consequences  
45(5) Without restricting the generality of  
article lues dans leur ensemble.  
2
Attributs fiscaux à déterminer  
subsection (2), and notwithstanding any  
other enactment,  
245(5) Sans préjudice de la portée générale  
du paragraphe (2) et malgré tout autre texte  
législatif, dans le cadre de la détermination  
des attributs fiscaux d’une personne de façon  
raisonnable dans les circonstances de façon à  
supprimer l’avantage fiscal qui, sans le  
présent article, découlerait, directement ou  
indirectement, d’une opération d’évitement :  
(a) any deduction, exemption or exclusion  
in computing income, taxable income,  
taxable income earned in Canada or tax  
payable or any part thereof may be allowed  
or disallowed in whole or in part,  
(b) any such deduction, exemption or  
exclusion, any income, loss or other amount  
or part thereof may be allocated to any  
person,  
a) toute déduction, exemption ou exclusion  
dans le calcul de tout ou partie du revenu, du  
revenu imposable, du revenu imposable  
gagné au Canada ou de l’impôt payable peut  
être en totalité ou en partie admise ou  
refusée;  
(c) the nature of any payment or other  
amount may be recharacterized, and  
(
d) the tax effects that would otherwise  
b) tout ou partie de cette déduction,  
exemption ou exclusion ainsi que tout ou  
partie d’un revenu, d’une perte ou d’un autre  
montant peuvent être attribués à une  
personne;  
result from the application of other  
provisions of this Act may be ignored,  
in determining the tax consequences to a  
person as is reasonable in the circumstances  
in order to deny a tax benefit that would,  
but for this section, result, directly or  
indirectly, from an avoidance transaction.  
c) la nature d’un paiement ou d’un autre  
montant peut être qualifiée autrement;  
d) les effets fiscaux qui découleraient par  
ailleurs de l’application des autres  
dispositions de la présente loi peuvent ne pas  
être pris en compte.  
Disposition  
2
48(1) disposition of any property, except  
Disposition  
as expressly otherwise provided, includes  
2
48(1) disposition constitue notamment une  
(
a) any transaction or event entitling a  
disposition de bien, sauf indication contraire  
expresse :  
taxpayer to proceeds of disposition of the  
property,  
a) toute opération ou tout événement donnant  
droit au contribuable au produit de  
disposition d’un bien;  
(b) any transaction or event by which,  
(
i) where the property is a share, bond,  
debenture, note, certificate, mortgage,  
agreement of sale or similar property, or an  
b) toute opération ou tout événement par  
Page: 21  
interest in it, the property is redeemed in  
whole or in part or is cancelled,  
lequel, selon le cas :  
i) une action, une obligation, un billet, un  
(
(
ii) where the property is a debt or any other  
certificat, une hypothèque, une convention de  
vente ou un autre bien semblable, ou un droit  
y afférent, est racheté en totalité ou en partie  
ou est annulé,  
right to receive an amount, the debt or other  
right is settled or cancelled,  
(iii) where the property is a share, the share  
is converted because of an amalgamation or  
merger,  
(ii) une créance ou un autre droit de recevoir  
une somme est réglé ou annulé,  
(
iv) where the property is an option to  
(iii) une action est convertie par suite d’une  
fusion ou d’une unification,  
acquire or dispose of property, the option  
expires, and  
(iv) une option concernant l’acquisition ou la  
(v) a trust, that can reasonably be  
disposition d’un bien expire,  
considered to act as agent for all the  
beneficiaries under the trust with respect to  
all dealings with all of the trust’s property  
(v) une fiducie, à l’égard de laquelle il est  
raisonnable de considérer qu’elle agit à titre  
de mandataire pour l’ensemble de ses  
bénéficiaires en toute matière liée à ses biens  
(sauf si elle est visée à l’un des alinéas a) à  
e.1) de la définition de fiducie au paragraphe  
108(1)), cesse d’agir à ce titre pour l’un de  
ses bénéficiaires en toute matière liée à ses  
biens;  
(unless the trust is described in any of  
paragraphs (a) to (e.1) of the definition trust  
in subsection 108(1)), ceases to act as agent  
for a beneficiary under the trust with  
respect to any dealing with any of the  
trust’s property,  
(c) any transfer of the property to a trust or,  
where the property is property of a trust,  
any transfer of the property to any  
beneficiary under the trust, except as  
provided by paragraph (f) or (k), and  
c) tout transfert de bien à une fiducie ou tout  
transfert de bien d’une fiducie à un  
bénéficiaire de celle-ci, sauf disposition  
contraire aux alinéas f) ou k);  
(
d) where the property is, or is part of, a  
d) si le bien est la participation d’un  
contribuable au capital d’une fiducie, ou une  
partie d’une telle participation, sauf  
disposition contraire aux alinéas h) et i), un  
paiement de la fiducie effectué au  
contribuable après 1999 qu’il est raisonnable  
de considérer comme ayant été effectué en  
raison de la participation du contribuable au  
capital de la fiducie.  
taxpayer’s capital interest in a trust, except  
as provided by paragraph (h) or (i), a  
payment made after 1999 to the taxpayer  
from the trust that can reasonably be  
considered to have been made because of  
the taxpayer’s capital interest in the trust,  
but does not include  
(e) any transfer of the property as a  
Ne constitue pas une disposition de bien :  
consequence of which there is no change in  
the beneficial ownership of the property,  
e) tout transfert de bien qui n’a pas pour effet  
de changer la propriété effective du bien,  
Page: 22  
except where the transfer is  
i) from a person or a partnership to a trust  
for the benefit of the person or the  
partnership,  
sauf si le transfert est effectué, selon le cas :  
(
(i) d’une personne ou d’une société de  
personnes à une fiducie au profit de la  
personne ou de la société de personnes,  
(ii) from a trust to a beneficiary under the  
(ii) d’une fiducie à son bénéficiaire,  
trust, or  
(iii) d’une fiducie administrée au profit d’un  
(
iii) from one trust maintained for the  
ou de plusieurs de ses bénéficiaires à une  
autre fiducie administrée au profit des mêmes  
bénéficiaires;  
benefit of one or more beneficiaries under  
the trust to another trust maintained for the  
benefit of the same beneficiaries,  
f) tout transfert de bien qui n’a pas pour effet  
de changer la propriété effective du bien,  
dans le cas où, à la fois :  
(
f) any transfer of the property as a  
consequence of which there is no change in  
the beneficial ownership of the property,  
where  
(i) le cédant et le cessionnaire sont des  
fiducies,  
(i) the transferor and the transferee are  
trusts,  
(ii) le transfert n’est pas effectué par une  
fiducie résidant au Canada en faveur d’une  
fiducie non-résidente,  
(ii) the transfer is not by a trust resident in  
Canada to a non-resident trust,  
(iii) le cessionnaire ne reçoit pas le bien en  
(
iii) the transferee does not receive the  
règlement de son droit à titre de bénéficiaire  
de la fiducie cédante,  
property in satisfaction of the transferee’s  
right as a beneficiary under the transferor  
trust,  
(iv) le cessionnaire ne détenait aucun bien  
immédiatement avant le transfert (sauf des  
biens dont le coût n’est pas inclus, pour  
l’application de la présente loi, dans le calcul  
d’un solde de dépenses ou d’autres montants  
non déduits à l’égard du cessionnaire),  
(iv) the transferee held no property  
immediately before the transfer (other than  
property the cost of which is not included,  
for the purposes of this Act, in computing a  
balance of undeducted outlays, expenses or  
other amounts in respect of the transferee),  
(
…)  
Tax payable  
48(2) In this Act, the tax payable by a  
Sens de impôt payable  
2
2
48(2) Dans la présente loi, l’impôt payable  
taxpayer under any Part of this Act by or  
under which provision is made for the  
assessment of tax means the tax payable by  
the taxpayer as fixed by assessment or  
par un contribuable, conformément à toute  
partie de la présente loi prévoyant une  
imposition, désigne l’impôt payable par lui,  
tel que le fixe une cotisation ou nouvelle  
Page: 23  
reassessment subject to variation on  
objection or on appeal, if any, in  
accordance with the provisions of that Part.  
cotisation, sous réserve éventuellement de  
changement consécutif à une opposition ou à  
un appel, d’après les dispositions de cette  
partie.  
ANNEX B  
[1]  
The Appellants tendered into evidence the expert report (the  
“Report”) of Alan B. Martyszenko, an accredited Chartered Business Valuator  
and member of the Canadian Institute of Chartered Business Valuators.  
[2] He purported to answer the following two questions:  
1
. Whether in his opinion the acquisition by FULP of the 8M units of FMO  
from the public unitholders would affect the fair market value of those units,  
and if so, what the effect would be?  
2
. Whether in his opinion the subsequent acquisition of those units by the  
Appellants would affect the fair market value of the units, and if so, what the  
effect would be?  
[3]  
The Report answered that the acquisition of the 8M units of FMO by  
FULP did not affect the fair market value of the units and that the subsequent  
acquisition of those units by the Appellants, also did not affect their fair market  
value.  
[4]  
At the hearing, the Court indicated that it would reserve on the  
admissibility of the Report. For reasons set out below, the Court finds that the  
Report is inadmissible because it is not relevant or necessary and because its  
probative value is overborne by it prejudicial effect. Alternatively, the Court  
concludes that the Report should be given little or no weight.  
[5]  
The recognized test for the admissibility of expert opinion evidence is  
a two-step test as set out by the Supreme Court of Canada in White Burgess  
Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23 (“White Burgess”)  
that confirms the common law principles previously described by the Supreme  
Court of Canada in R. v. Mohan, [1994] 2 SCR 9 (“Mohan”).  
[6]  
The first step of the test requires that the party seeking to adduce the  
proposed expert evidence establish that it satisfies the following four threshold  
requirements, also known as the “Mohan factors”:  
-
Relevance;  
-
-
Necessity in assisting the trier of fact;  
The absence of any exclusionary rule; and  
Page: 2  
-
A properly qualified expert.  
7] The second step is viewed as a discretionary gatekeeper function and  
[
requires that the trial judge conduct a cost-benefit analysis to determine if  
otherwise admissible expert evidence should be excluded because its probative  
value is overborne by its prejudicial effect. The trial judge must consider such  
things as consumption of time, prejudice and the risk of causing confusion.  
[8]  
The context of the first step, the Respondent has conceded that the  
Report is relevant because it relates to the Minister’s assumption that once the  
FMO units held by the public unitholders had been exchanged for the new  
units of FIF, they were worthless and the acquisition of those units by the  
Appellants in exchange for a demand promissory note of $114 million was a  
sham and a misrepresentation.  
[9]  
The Respondent has also accepted that Mr. Martyszenko was a  
properly qualified expert but has taken the position that he expressed a “non-  
valuation opinion”. It is argued that the Report is not “a type of valuation  
report recognized by the Canadian Institute of Chartered Business Valuators”  
since it does not purport to opine “on the fair market value of the FMO units or  
the FIF units”. In fact, it is argued that the value of those units was assumed  
and based on the trading value or “weighted average trading price” of the units  
on the Toronto Stock Exchange. Moreover, the effective date was assumed to  
be January 3, 2006 when the evidence established that the transactions in  
question had occurred on December 28, 2005.  
[10]  
The Respondent challenges the Report on the basis of necessity. It is  
argued that an expert report must deal with a subject-matter that ordinary  
people are unlikely to form a correct judgment about without assistance. It is  
argued that the evidence must be more than just helpful, it must be necessary  
for the trier of fact to appreciate the technical nature of matters in issue: RIS–  
Christie v. her Majesty the Queen [1999] 1 CTC 132(FCA) (para 12).  
[11]  
It is argued that the Report does not address the fair market value of  
the FMO units, being Mr. Martyszenko’s area of expertise, but rather any  
change to their fair market value in relation to the trading data on the Toronto  
Stock Exchange, and that this involves a comparative analysis that is within the  
realm of the trier of fact’s ordinary experience. It is also argued that the expert  
had access to less information than the trier of fact and that he lacked  
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appropriate context in that he was not aware of the FMO reorganization or  
Information Circular.  
[
12]  
gatekeeping functions, it is argued that the Report should be excluded because  
its prejudicial effect outweighs its probative value.” It is argued that even if the  
In the context of the second step that relates to the Court’s  
“
Report is relevant, it should be excluded “because the opinions expressed (…)  
will distort the Court’s fact finding process.”  
[13]  
Moreover, it is argued that the Report is misleading, biased and not  
reliable.  
[14]  
It is argued that the Report is ‘misleading’ because it “was not any of  
the three types of valuation reports” recognized by the expert’s professional  
body; it was not a report “determining the fair market value of a security” and it  
was not “a limited critique report” as described by the guidelines. It is argued  
that it was only in cross-examination that the expert opined that his Report  
might be one “that determined a conclusion of a financial nature in the course  
of litigation.”  
[15]  
It is argued that the Report is biased because the expert failed or  
refused to consider variances in the facts alleging that he had not been provided  
with the relevant financial statements or documentation. In particular, it is  
alleged that he failed to consider “whether the market value of the Old FMO  
units would be affected if its underlying assets of FVT were sold leaving Old  
FMO with no assets” or “whether the Old FMO units’ value would be affected  
if it was known that they were exchanged for New FIF units” or “whether the  
value of Old FMO units would be affected if it was known that FMO was  
delisted on December 28, 2005 and that there was no public market for those  
FMO units” and finally “whether the value of the FMO units would change if  
the evidence established that Mr. Grenon did not have the financial means to  
support the guarantee”. On the basis of the expert’s refusal to adequately  
respond to these queries, it is argued that he was no longer impartial or  
objective and that he was really an advocate for the Appellants.  
[16]  
It is argued that the Report is not reliable because the Appellants “did  
not establish some key factual assumptions which he was directed to rely upon  
in providing his opinion” notably the price history for the stock symbol  
(FMO.UN.T) or whether Grenon had the financial wherewithal to support the  
guarantees.  
Page: 4  
[17]  
On the basis of the foregoing, it is argued that the Report is not  
admissible, that the evidence is not necessary, that it is based on facts that were  
not proven and that its prejudicial effect far outweighs any probative value. If it  
is admitted into evidence, it is argued that it should be ascribed little weight.  
[18]  
The Appellants have taken the position that the conclusions reached in  
the Report are “uncontroverted and uncontroversial”.  
Analysis and Conclusion  
[19] I find that there are good reasons to conclude that the Report is  
inadmissible.  
[20]  
The Report was only relevant to two steps in a complex series of  
transactions that occurred on December 28, 2005. Despite the Respondent’s  
concession, I am not convinced that the term “relevant” is satisfied in these  
circumstances.  
[21]  
Secondly, it cannot be said that the Report was “necessary to assist the  
trier of fact”, again because it only addressed two isolated steps of the FMO  
reorganization and because the expert was not provided with certain key  
documents including the Information Circular. As a result he lacked proper  
context in the analysis that was carried out. The Court is left with the  
impression, rightly or wrongly, that the expert assumed that the subject  
reorganization involved a simple one-for-one exchange of the old FMO units  
for new FIF units that continued to trade on the Toronto Stock Exchange under  
the same ticker symbol without any change in the underlying assets. In  
particular, the expert admitted that he had no knowledge of FVT such that the  
Court is left wondering whether he understood that FVT and its underlying  
assets would be transferred to TOM.  
[22]  
I also agree with the Respondent that the Report is misleading,  
potentially biased and unreliable. I find that it is a distraction for the Court since  
it seeks to give credence to a few isolated steps without considering the FMO  
reorganization as a whole.  
[23]  
If I am wrong in concluding that the Report is inadmissible having  
regard to the so-called Mohan factors, I find that the prejudicial effect of the  
Report far outweighs any probative value it may have and I attach no weight to  
it.  
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ANNEX C  
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CITATION:  
2021 TCC 42  
COURT FILE NO.:  
2017-486(IT)G;  
2
2
017-605(IT)G;  
017-606(IT)G  
STYLE OF CAUSE:  
MAGREN HOLDINGS LTD. v. HER  
MAJESTY THE QUEEN  
AND BETWEEN:  
2
176 INVESTMENTS LTD. (as successor  
to Grencorp Management Inc., successor to  
94047 Alberta Ltd.) v. HER MAJESTY  
9
THE QUEEN  
AND BETWEEN:  
MAGREN HOLDINGS LTD. (Successor  
by amalgamation to 1052785 Alberta Ltd.)  
v. HER MAJESTY THE QUEEN  
PLACE OF HEARING:  
DATE OF HEARING:  
Winnipeg, Manitoba  
February 11, 12, 13, 14, 15, 18, 19, 20, 21,  
2
2
2, 2019 and September 9, 10, 11, 12, 13,  
019.  
REASONS FOR JUDGMENT BY: The Honourable Justice Guy R. Smith  
DATE OF JUDGMENT:  
June 24, 2021  
April 1, 2022  
DATE OF AMENDED  
JUDGMENT:  
APPEARANCES:  
Counsel for the Appellant:  
Cy M. Fien  
Brandon Barnes Trickett  
Ari M. Hanson  
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Aron W. Grusko  
Counsel for the Respondent:  
Ifeanyi Nwachukwu  
Tanis Halpape  
Christopher Kitchen  
Jeremy Tiger  
COUNSEL OF RECORD:  
For the Appellant:  
Name:  
Cy M. Fien  
Brandon Barnes Trickett  
Ari M. Hanson  
Aron W. Grusko  
Firm:  
Fillmore Riley LLP  
For the Respondent:  
Nathalie G. Drouin  
Deputy Attorney General of Canada  
Ottawa, Canada  


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